What 13 Founders Learned from Their Biggest Business Failures
Failure is often the most valuable teacher in business. While success stories dominate headlines, the lessons learned from ventures that didn’t work out often prove more instructive than those from companies that succeeded on the first try.
We asked successful founders and CEOs to share the most valuable lesson they learned from a failed business venture. Their responses reveal hard-earned wisdom that only comes from experiencing setbacks firsthand. From partnership disasters to product-market fit failures, these entrepreneurs transformed costly mistakes into the principles that now guide their thriving businesses. Here’s what they learned the hard way, so you don’t have to.
👉 See our report on business failure rates
Require Written Commitments Over Handshakes
Back in 2011, I launched a referral partnership network with accountants and financial planners across Sydney. The idea was simple enough. They’d send me clients who needed home loans, and I’d send them clients who needed tax advice or wealth management. It seemed like a win to everybody involved. I was with 14 different practices for three months, getting verbal agreements from all 14 of them. We shook hands, talked about how much business we’d send each other, and I walked away thinking I’d just built a referral machine that would run itself.
Eight months later, the whole thing had generated exactly two referrals total. Not two per partner. Two referrals in the whole network. Meanwhile, I’d referred out about 23 clients to these other businesses and gotten almost nothing back. What I learned from that is that verbal commitments are absolutely nothing in business partnerships. People have good intentions when they’re sitting across from you at lunch, but those intentions disappear the second they get back to their desk and 47 other things need their attention.
This is why now, we require written service level agreements before any partnership officially gets underway. The agreement outlines exactly how many referrals each party is committing to per quarter and what happens if someone doesn’t live up to their end. That failed network was $8,000 worth of time and meals, but it taught me that structure beats enthusiasm every single time.
Shaun Bettman, CEO and Founder, Eden Emerald Mortgages
Verify Demand Prior to Launch
One of the most valuable lessons I learned came from a small SaaS side venture I co-launched early in my career. We built a lightweight feedback tool aimed at early-stage startups. On paper, it made sense. Founders struggle to organize customer input, and we believed a simple, affordable product would resonate.
We spent six months building before speaking to more than a handful of potential users. That was the first mistake.
When we finally launched, signups trickled in, but activation was weak. In onboarding calls, founders told us they liked the idea, yet they were already using spreadsheets or tools like Intercom for feedback. Switching felt like extra work. We had built something logical, not something urgent.
The hardest moment was reviewing churn after three months. Over 60 percent of users had stopped logging in. In exit interviews, a consistent theme emerged. The product solved a secondary problem, not a primary pain. Founders were more concerned with acquisition and fundraising than organizing feedback. We had misjudged priority.
What I learned was not simply to validate earlier. I learned to test for urgency. Now, before investing serious time or money, I ask potential customers what they’re actively spending on today to solve the problem. If there’s no budget, no workaround, or no visible frustration, I treat that as a warning sign.
In later projects, I applied this lesson directly. When advising a people management software company, we ran structured discovery calls before committing to a new analytics module. We asked prospects to show us their current reporting process live on screen.
Watching HR leaders manually merge CSV files for quarterly board reports showed real friction. That module succeeded because it addressed something already consuming time and attention.
Failure taught me to respect timing and priority. A problem can be real and still not be important enough. That distinction changed how I evaluate every new idea.
Ganesh Iyer, Founder, CX Everywhere
Own Core Capabilities Never Outsource
I learned that you cannot outsource your core competency. In my second startup, I had a great idea for a logistics app. I knew sales and marketing, but I didn’t know how to code. I raised a seed round and immediately hired an overseas development agency to build the product. I thought this was smart. I could focus on selling while they focused on building.
It worked for six months. Then the market shifted. Customers wanted a specific new feature, and they wanted it fast.
I called the agency. They told me they had a six-week backlog. I tried to explain the urgency, but I was just one of their ten clients. They didn’t care about my deadline. I had no control over the code. I didn’t even know how to look at the GitHub repository to see if they were working.
My competitors updated their apps in a week. I waited two months. By the time we shipped the update, our early adopters had moved on.
If you’re a tech company, you must own your tech. If you’re a content company, you must own your content. You can outsource accounting or janitorial work, but never outsource the thing that makes you money. I taught myself to code after that. I needed to understand how the engine worked before I tried to drive the car again.
Philip Stoelman, Founder & CEO, Network Republic
Decline One-Off Deals to Scale
The most expensive lesson I ever learned was that landing a “big win” with a massive enterprise client can actually be a death sentence for a startup. Early on, we signed this huge contract, and we thought we’d hit the jackpot. But to keep them happy, we ended up pivoting our entire roadmap to fit their specific, legacy requirements. We told ourselves we were scaling, but we weren’t. We were just becoming an expensive, outsourced R&D department for a single company.
By the time we realized we had zero product-market fit outside of that one silo, our burn rate was out of control. We simply couldn’t generalize the software fast enough to save ourselves.
This happens way more often than founders like to admit. CB Insights consistently finds that a “lack of market need” is a top reason for failure, and that usually starts when you build something too niche for one specific buyer. It taught me that saying “no” to a high-paying, non-scalable request is actually more important than the revenue itself. If your product can’t survive without one client’s specific demands, you haven’t built a business — you’ve built a cage.
Scaling a company is as much about what you refuse to do as what you actually execute. It’s incredibly easy to get distracted by short-term cash, but if you want to survive over the long term, you need a ruthless commitment to a repeatable vision. If it isn’t scalable, it’s just a distraction.
Kuldeep Kundal, Founder & CEO, CISIN
Make Distribution the First Priority
One of the most valuable lessons I learned from a failed venture was that product quality alone doesn’t create momentum. In that business, we built something technically strong and well-liked by a small group of users, but we underestimated how hard distribution really is.
We spent most of our time perfecting features and very little time validating how the product would be discovered, adopted, and repeatedly used at scale. When growth stalled, our instinct was to keep building. In reality, the issue was not what we were building, but how it reached people and fit into their existing habits.
The venture failed not because the product was bad, but because we treated distribution as a secondary problem. By the time we tried to fix it, we had already burned time and resources.
The lesson stuck with me. A business is not just a product; it is a system that includes acquisition, activation, retention, and communication. If any of those are weak, the whole thing suffers.
Today, I validate distribution assumptions as early as product assumptions. I ask how this will spread, who will champion it, and why it will earn attention repeatedly.
That failure changed how I build. It pushed me to think more holistically and to respect the go-to-market strategy as a first-class problem, not an afterthought.
Ahad Shams, Founder, Heyoz
Pursue Urgent Pain Not Brilliance
One of the most valuable lessons I learned from a failed venture is that market pain matters more than product brilliance.
In an earlier business, we built something technically strong and genuinely innovative, but we anchored our decisions around what we believed customers should want instead of validating what they urgently needed. Adoption was slow, sales cycles dragged, and every customer conversation felt like persuasion.
What I learned is simple but hard-earned: if customers do not feel the pain strongly enough to act today, your solution will struggle no matter how elegant it is. Now, before building anything, I look for signals of urgency. Budget already allocated, workarounds already in place, and a clear cost of doing nothing.
That lesson directly shaped how we built Wisemonk. We focus on solving immediate, operational problems companies face when hiring and managing talent in India, not hypothetical future needs. When the pain is real, growth becomes a byproduct rather than a goal.
Aditya Nagpal, Founder & CEO, Wisemonk
Prioritize Usability Through Direct Observation
When I first started, I developed a software tool for small shops that were going to take over their daily bookkeeping and inventory tracking. The issue was that I had focused on the math instead of how a shop owner was actually going to use the screen.
People loved the idea of saving hours on paperwork, and they stopped using the tools as soon as they realized how many buttons they had to click just to log one sale, which taught me that if a product is not easy to handle, nobody sticks with it.
I had to go back to the beginning and set up sessions in which I sat behind users as they tried to log a week of sales from scratch without me saying a word. I observed where they were getting stuck, and I noticed that most of them were not even finding the upload button, so I moved the main tools to the front and reduced the number of sign-up steps by half. I experienced a 40% increase in sales as soon as I stopped relying on assumptions alone and began listening to the way in which customers behave, and we continue to operate according to this principle.
Punit Jindal, Founder & Entrepreneur, Dancing Numbers
Validate Willingness to Pay Early
I believe the most valuable lesson I learned from a failed venture was that building something people admire is not the same as building something they’ll pay for. In that business, we spent a lot of time perfecting the solution, features, architecture, and even messaging, but not enough time validating urgency. Customers liked what we were doing, but they didn’t feel pain strongly enough to change behavior or allocate budget.
The failure became obvious slowly. Sales cycles dragged, decisions stalled, and feedback sounded encouraging but non-committal. We were solving a “nice-to-have” problem and hoping great delivery would compensate. It doesn’t. No amount of polish can fix weak demand.
That experience taught me to anchor everything around a decision that already exists. If customers aren’t actively trying to solve the problem today, you’ll spend your energy convincing instead of delivering. In later ventures, I became far more disciplined about validating willingness to pay early, even if it meant uncomfortable conversations.
The takeaway I’d share with other entrepreneurs is to fall in love with the problem, not your solution. If the problem is real and urgent, execution can improve. If it isn’t, even a great product will struggle to survive.
Manish Kumar, Founder, Metrixs
Focus Narrowly to Master the Craft
Before my web design and SEO agency started to succeed, I tried to start a “full-service” digital marketing agency. This meant that I was trying to be an expert in not just web design and SEO, but also social media, paid ads, email marketing, video production, the whole nine yards. And of course, that business was failing miserably. I only started to succeed once I ditched everything except for web design and SEO, because then I finally had enough time to truly master that craft.
As a new business, it’s important to focus on a small number of products or services. The same concept applies to SaaS (a new software should focus on delivering a small number of features flawlessly). Don’t try to be everything at once, especially in the early days.
Daniel Houle, Founder & Creative Director, Azuro Digital
Factor Macroeconomics Into Nascent Risk
One valuable lesson that I learned from a failed business venture is that macroeconomics and the state of the world at large absolutely have an impact on your small business or startup. In the early years, your startup is at its most vulnerable, and it doesn’t take much to kill its growth.
For me, before launching my current venture, I attempted to launch a pre-workout brand. We were deep into formulation and getting ready to spend tens of thousands on our first production order. Then COVID hit. A black swan event like this closed gyms nationwide, and for a budding pre-workout company, this was catastrophic. The business folded before it even launched.
That lesson now shapes my business and how I approach risk assessment of external factors because the vulnerability of a young business to external shock is not negligible.
Assaad Alaouie, Co-Founder and CEO, Deadline Bar
Set Salary and Vet Partner Values
The moment I stopped looking at my business as my “child” and started looking at it as an efficient system, everything changed. I learned that an entrepreneur must pay themselves a fixed salary as a business expense.
This shift in mindset stops you from treating the company’s revenue as your personal profit and forces you to justify your own cost to the company. If you wouldn’t hire someone else at your salary to do your job, you’re not building a business. You’re just creating a job for yourself.
On partnerships: never tie yourself legally to someone until you’ve tested your “value match.” You can negotiate strategy, but you can’t negotiate values. If one partner is built for frugality and the other for vanity spending, the internal conflict will distract you from the only thing that matters: building the company.
Jeff Tilley, Founder & CEO, Muncly
Align Business Model With Talent Supply
Before I launched my current business, I wanted to run my own design agency and build websites for small businesses. The idea was good, but it relied on hiring other people who could design, and that failed miserably.
People who could do design as well as I were already employed or freelanced for the same rates I charged as an agency. People who were available were not very good. Unfortunately, I could not clone myself or lower my standards, so I quickly closed that and went on to start something else.
Daniel Kroytor, CEO, TailoredPay
Codify Control and Safeguard Liquidity
In 2000, as a result of the COVID pandemic, I lost a 10-year-old 7-figure business. Amidst the devastation I felt as a result of that unexpected failure, there are several lessons I learned and carried into my next business venture.
First, any partnership must have a shareholder’s agreement. Second, 50/50 business partnerships carry an unnecessary risk and are highly detrimental to the business in the event of crisis or conflict. There has to be one person carrying ultimate decision-making authority. Third, a business without cash reserves is weak regardless of its margins and cash flows. Any unexpected event can be catastrophic, which is what happened to my business.
Marina Byezhanova, Co-Founder, Brand of a Leader
The entrepreneurs featured here share a common thread: they didn’t let failure define them, but they did let it teach them. Whether it was learning to validate demand before building, securing written commitments over handshakes, or recognizing that distribution matters as much as product quality, each lesson came with a price tag measured in time, money, and hard experience.
What separates successful entrepreneurs from those who give up is their ability to extract value from setbacks. The founders who shared their stories here turned expensive mistakes into operating principles that now shape how they evaluate partnerships, build products, and assess risk. Their failures weren’t endpoints; they were expensive but invaluable education that laid the foundation for future success.
If you’re navigating a setback right now, remember that some of the most successful entrepreneurs you admire have been exactly where you are. The question isn’t whether you’ll face failure, but whether you’ll learn from it.
