Why Early-Stage Software Startups Fail: A Behavioral Framework

Abstract: Software startups are newly created companies with little operating history and oriented towards producing cutting-edge products. As their time and resources are extremely scarce, and one failed project can put them out of business, startups need effective practices to face with those unique challenges. However, only few scientific studies attempt to address characteristics of failure, especially during the early- stage. With this study we aim to raise our understanding of the failure of early-stage software startup companies. This state-of-practice investigation was performed using a literature review followed by a multiple-case study approach. The results present how inconsistency between managerial strategies and execution can lead to failure by means of a behavioral framework. Despite strategies reveal the first need to understand the problem/solution fit, actual executions prioritize the development of the product to launch on the market as quickly as possible to verify product/market fit, neglecting the necessary learning process.