Why startups fail: The dangers of building backwards

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We’ve all heard the statistic that 9 out of 10 startups fail. While this happens for numerous reasons, I believe one of the biggest—and least discussed—is that many founders make a critical error on day 1 of running their business: they build backwards. In my opinion, building backwards creates a direct path to becoming part of that failure statistic. Building backwards is not only counterproductive but also very difficult to recover from unless you have a significant amount of time and money. Unfortunately, many startups still fall into this trap, even though it’s easily avoidable.

What does “Building backwards” mean?

Building backwards happens when startups jump straight into creating a product without verifying if there’s actual demand for it. Founders often get a business idea and immediately start building, believing they are meeting a market need, instead of first testing the waters to see if anyone is willing to pay for the product they want to create.

When you bypass that crucial first step—validating the problem and understanding your customer base—you’re essentially building in reverse. It’s like constructing a house before confirming the land is stable. This approach misses a crucial aspect of business development: building something that meets real demand, not just an imagined one. I touched on this concept briefly in “6 Essential Lessons for Startup Success,” but it’s such a widespread issue that it warrants its own exploration.

The risks of building without market validation

At its core, a successful business earns more than it spends, preferably with enough profit to pay those who own and operate the business a livable wage. To achieve this, a company must offer something people want badly enough that they are willing to pay for it—this is one reason I’m cautious of the freemium model that many startups try to adopt these days. Without that fundamental demand or knowing there are customers eager and ready to pay for your product once it hits the market, how will you know people are waiting to pay for what you’ve built? The answer is, you won’t know. This is why sometimes, even the most well-crafted products created by talented teams end up being little more than costly experiments that never leave the lab.

If you haven’t confirmed a demand for your product, you risk pouring your resources—time, money, and effort—into something that people may never buy. By the time most startups realize there’s no demand, it’s often too late to pivot. They’re left watching their cash reserves dry up, and their once-hopeful startup begins the slow descent into closing its doors for good.

Building backwards wastes resources and loses investor interest

This misstep ends up having significant knock-on effects because, when you build backwards, you also end up wasting resources and decreasing your chances of receiving third-party investment. “Wasting resources” means that, if you’re building, it most likely means you’re dedicating time, money, and development efforts to constructing something you’re not sure anyone will buy once it’s complete. I’ve personally seen someone spend over $80,000 on software development only to have no paying clients or customers on the other side. This person eventually shut down their business, quietly taking it offline.

Building backwards is also a red flag for investors who want to know if their dollars will contribute to measurable growth. They want to know that if they give you one dollar today, they’ll see at least ten back in the future due to the growth and impact your company will achieve, partly thanks to their investment. One of the best things a startup can do to send a positive signal is to show that they are growing and scaling or, put more plainly, continually getting more customers and improving their business operations. But how will a company do this if they don’t have any customers or haven’t even talked to any potential customers?

In today’s world, it’s going to be tough to convince an investor to write you a check if you don’t have active customer demand, often referred to as ‘traction.’ Investing in startups is already a high-risk endeavor, so investors do everything they can to mitigate risk, which is why they conduct so much due diligence before finalizing a deal. One way to mitigate risk is by investing in businesses with paying clients and customers—or, at the very least, a business that has laid the groundwork to understand what potential customers want and how to onboard these potential customers; this gives the investor confidence that the team has created something of value that people are willing to pay for. But if a company builds backwards, it’ll have neither the traction nor the internal market research they need to send this positive signal.

Building startups the right way: Testing ideas with real customer insights

So, what’s the right way to build? Once you have an idea and a rough business model, your next step should be viewing this as a hypothesis—not a business solution, but a concept of a solution that needs testing before it can come to fruition. Instead of jumping straight into development, take your idea to prospective customers. Conduct customer discovery interviews, asking open-ended questions to learn if the problem you’re addressing is genuinely an issue for them. Let’s be honest—this customer discovery phase isn’t as thrilling as building right away, but it’s a step that will ultimately save you time and money.

Through these conversations, you’ll start to recognize patterns in customer needs. When you’ve spoken to several customers who yield statistically significant insight into their shared frustrations, you’ll know where the demand lies for a product or service that solves it. Only then should you refine your solution to align with what customers are actually willing to pay for. Now, when you start building, you’re not guessing—you’re creating something that provably has value for your potential customers and, more importantly, creating something that is in demand.

Building startups for sustainable growth

A customer-first approach requires more patience up front, but it provides the best shot at sustainable growth. “Building forward,” or rather, “not building backwards”—ensures that your product not only solves a problem but solves a problem that people are experiencing. This approach minimizes wasted resources and maximizes your chances of creating something people are eager to pay for.

By validating your idea first, you’re effectively giving your startup a sturdy foundation. As you develop, you’ll have a clear sense of who you’re serving and why they need your product, and when you finally launch, you’ll be met by a market that’s ready to buy your solution.

Validating customer needs drives startup success

Ultimately, building the right way, in a chronologically forward way, allows you to create a business rooted in real, validated customer needs, not assumptions. This process may feel slower, but the results are worth it: a product that has a genuine market, a customer base ready to buy, and an increased chance of investor interest. Building forward makes your startup more resilient, more attractive to investors, and far more likely to succeed in the long run.

So, before you dive headfirst into development, remember that the best businesses are built by solving real problems for real people. Take the time to validate your idea, understand your customers, and adapt your solution accordingly. By doing this, you’ll set your startup on a path toward sustainable growth and give yourself the best possible chance of becoming part of the rare 10% of startups that succeed.

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