90% of startups fail. Any guesses where our first one landed?

December 19, 2024
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Lessons learned

When we launched SnapFile, we were prepared for the risks. What we weren’t prepared for was the implosion of a little industry thanks to the judicial branch of the government. We've heard the cliché that 90% of startups fail. We knew these odds, and we took them seriously. That’s why we tested rigorously and worked hard to mitigate risks—but some challenges are hard to anticipate.

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SnapFile’s Journey

When we started SnapFile, we did a lot of testing. We looked at problems to solve, propensity to pay, some tests for demand, and built some iterative prototypes. From what we could tell, SnapFile hit the mark pretty well on all of those benchmarks. 

Our business performance to date was decent for a brand new business. 

  • We were expecting to be profitable at the end of the year based on bookings
  • With a procrastinator driven business like ours, you see almost all of your revenue right at the deadline (YE 2024)
  • It wasn’t going to be enough to retire on, but respectable. 

However, we put the business on indefinite pause a few weeks ago. Why?

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A reminder of what SnapFile does: 
  • Software product for filing beneficial ownership information (BOI) reporting
  • BOI reports are required by the end of the year under the Corporate Transparency Act 

But what happens with new regulation like this? So many legal challenges! It had seen many of those and had survived… until early December. A judge in Texas issued an injunction, which prohibits BOI report requirements from being enforced. This means BOI reports are voluntary, and you can imagine how many people want to submit a confusing voluntary report to the government. To really put a nail in the coffin, treasury shut down the API for reporting just a couple of days after the injunction was issued. So that means our data pipes were also not functional. Legal injunctions and technical shutdowns made it impossible to proceed, forcing us to pause the business.

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Facing the Startup Odds

SnapFile seemed to hit the benchmarks well—product-market fit, demand, and iterative testing. But as with so many startups, unforeseen challenges arose. In fact, failure is common: 90% of businesses fail due to:

  • Lack of Product-Market Fit: 42% of startups fail due to creating a product that the market doesn't want or need
  • Running Out of Cash: 29% of startups fail because they run out of money, highlighting the importance of proper financial management and cash flow
  • Not the Right Team: 23% of startups fail due to having the wrong team composition, including issues with co-founders, early hires, or investors
  • Lack of Market Demand or Poor Timing: Many startups fail because they don't address genuine customer needs or enter the market at the wrong time
  • Poor Marketing: 14% of startups fail due to inadequate marketing efforts, emphasizing the need for effective customer acquisition strategies
  • No Clear Business Model: 17% of startups fail because they lack a well-defined strategy for generating revenue and achieving sustainable growth
  • Getting Outcompeted: 19% of startups fail because they are unable to compete effectively in their marke
  • Pricing/Cost Issues: 18% of startups fail due to problems with pricing strategies or managing costs

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Lessons Learned and What’s Next

We likely fall into the 90%. Pausing our business is kind of the same as the business failing. Sure, we can blame it on the judicial branch blowing up that niche, but that isn’t the full story. This business has been much harder than we anticipated, despite all of our testing in planning efforts. In the coming posts, I will share a whole bunch of learnings:

  • Marketing lessons
  • Issues with our go to market strategy
  • Interpreting / misinterpreting early signals that I’ve talked about in the past
  • How we built this - actual tips and tricks to build and operate a business with so many AI tools
  • So many other things!

Like any brand new business owners, we made a ton of mistakes. We also built and launched a software business boot, strapped with just a couple of people in a matter of months, so that’s also something to be really proud of. 

Although we likely are in the 90% of businesses that fail, this has been an amazing learning experience. I’m really excited to share some things we’ve learned and also give a preview into what might be next. We’ve learned invaluable lessons and proven to ourselves that we can take an idea from concept to launch. This might be the end of SnapFile for now, but it’s not the end of our entrepreneurial journey—or the lessons we’re eager to share. If anything, this experience has strengthened our resolve to keep building, experimenting, and learning.

Thank you to everyone who has followed the journey, offered help, and encouraged us along the way. SnapFile may be paused, but our ambition to create, solve problems, and learn is just getting started. The journey continues!