The Moment Every Founder Dreads When You Ask “Is This Actually Working?”

70% of the 431 VC-backed companies analysed by CB Insights ran out of capital before shutting down. Yet 43% cited poor product-market fit as a reason for failure.

The money running out may be the final blow, but the real problem often starts much earlier.

Is this actually working?

At an event I attended last week, a founder came up to me and said, "Revenue isn't growing, customers aren't coming back, and my latest funding hasn't come through."

"What do I do, Duane?"

I could hear the frustration in the question. These weren't just business problems anymore. This was someone trying to figure out what happens when the things you've been working towards are no longer going the way you expected...

The runway is getting shorter, customers aren't coming back, funding hasn't come through, and the team is starting to lose confidence. At that point, the problem is no longer just having a bad month. I don't want to name names, but you could feel the emotional weight behind the question. Watching something you built start to fall apart is a different kind of pressure...

There can be shock, guilt, anxiety and even shame. I've experienced some of that uncertainty myself when we were running our clothing business, so I know the feeling is not always just about the numbers.

From the outside, it may look like a business problem, but for the founder, it can feel much more personal.

Some founders may convince themselves that they just need more time, another investor or one big customer to turn things around. Others start thinking about what they should do next, whether they should pivot, or whether it is finally time to walk away...

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Part One
When Things Start Going Wrong

Startups Rarely Die Overnight Because They Unravel

Startup failure doesn't just happen overnight. It isn't always one dramatic event or a "judgment day" where everything suddenly falls apart. For me, there are phases before a startup really becomes a failure.

It can start with small things going wrong.

Sales aren't good. Founders start using their own savings to cover expenses. The company can't afford to hire the employee it needs. Product improvements get delayed.

Then you notice something else. Customers aren't coming back. Bad reviews start appearing. The business becomes dependent on one or two customers.

Then comes the funding problem. You need another funding round to keep the company going, but the funding doesn't come through.

Now the pressure isn't just on the founder. The whole team starts to feel it.

What started as "we're having some problems" can slowly become "we might not survive."

It can gradually go from "we're having problems" to "we might not survive." Problems are normal in a startup, but when everything starts piling up, you can't help but ask whether there is a deeper problem.

"Problems are normal. The real problem is when they start piling up and you keep telling yourself they are temporary."

That is when you need to take a step back, breath, stretch and look at what is really happening. Is this just a difficult season that the business can recover from, or is it becoming a pattern that needs to be looked into?

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When a Bad Month Becomes a Bigger Problem

Having a bad month doesn't necessarily mean your startup is already failing. It could be seasonality, delayed customer payments or a product launch that didn't go as planned. We experienced this with our clothing business too. There were months that were simply bad, and we were able to identify some of the problems. Number one was seasonality. It depends on what trends or fashion people need. We also experienced delayed payments from clients and times when we were stuck with product development.

The bigger concern is when the same problems keep appearing.

Sales are down this month, so you tell yourself it's temporary. Sales are down again next month, so you think you just need another month. But when sales have been down for four to six months, it becomes harder to call it temporary. At that point, there is a pattern, and you need to ask whether there is a deeper problem.

Why Running Out of Money Is Often the Final Symptom

When a company runs out of money, it can feel like that is the reason the startup failed. It might be the end game, but the better question is: why did it run out of money?

It may have started with poor sales and low revenue. Then the company cuts expenses, hiring stops, product development slows, employees become unhappy and customers become unhappy. Growth gets worse or gets stuck. The company needs more funding, but investors aren't convinced by the current position of the business. Eventually, the cash runs out.

We experienced this ourselves. There was a point when we ran out of cash and had to borrow money. But we didn't throw in the towel just because we realised we didn't have money anymore. Instead, we tried to identify the problems and figure out what we could do next.

In many cases, founders look at the final problem because it is much easier. They simply say, "The company failed because it ran out of cash." But we should ask: why did the money run out in the first place?

Cash is often where startup failure becomes visible, not necessarily where it begins.

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Part Two
The Warning Signs Founders Often Ignore

The Problems Founders Explain Away for Too Long

Founders don't always ignore problems because they don't see them. Sometimes, they see the warning signs but keep finding reasons why things will get better.

"We Just Need More Time"

This is where analysis paralysis can kick in. Instead of using the time to decide what needs to change, founders can spend too much of it planning, waiting and hoping that the situation improves. There is a difference between genuinely making progress and simply postponing a difficult decision.

"We Just Need More Funding"

It is normal to believe that additional funding could save the business, especially when money is running low. But more money doesn't automatically mean the business is saved. If there is a deeper problem, funding may only give the company more time to deal with the same problem. Before looking for more money, founders need to understand why the business is struggling in the first place.

"The Market Just Doesn't Get It Yet"

Sometimes a founder's passion takes over. You become more focused on what you want to build than what customers actually want. You may tell yourself that customers simply need more time to understand the product or that the market isn't ready yet.

We experienced something similar with our clothing business. There were times when our designer wanted to push a particular design, but the client didn't want it. That led to back-and-forth discussions and longer negotiations. It was a reminder that what we wanted to create wasn't always what the customer wanted.

"One Big Customer Will Change Everything"

Having a big customer can be great, but depending too heavily on one customer is risky. In our experience, we also relied on one big customer, but when they started slowing down their orders, the business slowed down with them.

It can feel like a high-risk, high-reward situation, but if one customer has too much influence over your business, their problems can quickly become your problems too.

The Failure Trap: When Persistence Starts Working Against You

Persistence is a good quality for a startup founder to have. You need it because building a business is difficult and things rarely work perfectly from the beginning. But persistence isn't always a good thing.

Sometimes, you keep pushing an idea because you believe giving up means you have failed. You might even keep telling yourself that there isn't a problem when the problem clearly needs to be addressed. That is where persistence can turn into stubbornness.

Conviction vs Stubbornness: Knowing the Difference

As founders, we really need to know the difference between conviction and stubbornness. There is a very fine line between the two.

Conviction is knowing that the problem is difficult, but the evidence is telling you there is still an opportunity to make it better or make it work.

Stubbornness is knowing that things aren't working anymore but refusing to accept that you might be wrong.

The difficult part is being honest enough with yourself to know which one you are showing.

So ask yourself:

Are you fighting through a difficult period, or are you fighting against what the evidence is telling you?

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Part Three
Diagnose Before You Decide

Before You Blame the Market, Diagnose the Business

When something goes wrong, it is easy to blame the market. But before making a major decision, founders need to understand where the actual problem is.

At Startup Networks, I would look at six areas: Market, Product, Distribution, Economics, Team and Execution.

Market: Does Anyone Need This Enough?

Getting customer feedback is important because reviews can give you data about what people actually think. Running a market study can also help you understand demand and whether people are willing to pay. Even simple things like word of mouth, repeat customers, subscriptions and page follows can give you an idea of whether people are interested enough to stay connected with the business.

Product: Are You Solving the Right Problem?

Listen to the voice of your customers. Their feedback can help you understand whether the product is actually solving the problem you think it is. We learned this the hard way with our clothing business when we tried designs that didn't fit the taste of our customers and received bad feedback.

Distribution: Can You Actually Reach Customers?

Your product might be good, but if you cannot get it to your customers, how can you sell more? Startups need to find distribution channels that fit their product instead of simply relying on the traditional approach.

Economics: Does the Business Make Financial Sense?

Founders need to understand the economic state of their business, including margins, customer acquisition costs, lifetime value, burn rate and runway. If you don't have the skills to assess these properly, getting professional help can be important.

Team: Are the Right People Building It?

The team must play its role effectively, and it starts with the founder. Poor leadership, missing skills, co-founder disagreements or a lack of manpower can all contribute to the problem. Sometimes founders end up wearing too many hats and trying to do everything themselves.

Execution: Are You Doing the Right Things Well Enough?

Sometimes the opportunity is good, but the execution isn't. Founders should look at all six areas instead of immediately blaming the market. If something is wrong, run the diagnostic again, trace where the problem starts and deal with it there.

Startup Networks Failure Diagnostic:

Market -->  Product --> Distribution --> Economics-->  Team --> Execution

This can save time, resources and potentially the company.

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Part Four
The Decision

The Founder's Crossroads: Stick, Twist or Walk Away?

Once you've diagnosed what is going wrong, you eventually have to make a decision.

Stick, twist or walk away.

I know "stick, twist, walk" might remind you of an Oreo, haha. But just like eating an Oreo, the ending depends on what you get when you open it. Is the business still good enough to continue, does something need to change, or is it time to stop?

🟢 Stick: When the Evidence Says Keep Going

"The business is struggling, but I don't think we should give up yet."

That is what I told my team when our clothing business was struggling. We knew things weren't going well, but I didn't think that meant we had to throw in the towel immediately.

One of the biggest things we had to look at was the customers. Did they still want the product? Were they coming back? Were sales and other numbers showing any signs of improvement?

If there is still demand and you can see progress, there may be a reason to keep going. The important thing is whether the problems can realistically be fixed.

But persistence also needs resources. You need enough runway and enough capacity to actually make the changes.

If the evidence shows there is still an opportunity, stick to it.

🟠 Twist: When the Business Needs to Pivot

The first thing that comes to my mind when I hear the word "pivot" is basketball. This is where I learned what it means. You pivot when you need to change direction, avoid an opponent, attack the basket or move back into position.

Business can work the same way.

Pivoting also connects to persistence. You don't keep doing exactly the same thing when it isn't working. You try another approach. With our clothing business, for example, we had to think about how we could improve the product, who our target customers were, whether the price was reasonable, how we were selling and whether the business model still made sense.

A pivot doesn't necessarily mean abandoning the mission. Sometimes it means changing the route.

🔴 Walk Away: When Closing Is the Right Decision

This is probably the hardest question for a founder to answer: When is it time to close the business?

Sometimes the signs are already there. Nobody really wants the product anymore. The business isn't making money. You're running out of cash. You've already tried several changes and they haven't worked. The founder no longer believes in the opportunity, and continuing would only create more debt or losses.

Walking away doesn't necessarily mean the founder failed. Sometimes, recognising that continuing will only make things worse is also part of making the right decision.

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Part Five
The Question Founders Don’t Want to Answer

There is one question I think every founder should ask when a startup is struggling:

"Knowing everything you know today, if you hadn't already started this company, would you start it?"

It sounds simple, but it can be uncomfortable. Especially when you've already invested your time, money and energy into the business.

What Your Answer Is Really Telling You

For our clothing business, I know there are things I would do differently. Product would be one of the biggest. I should have listened more to our customers and, maybe, listened more to the team as well.

If your answer is yes, there may still be something worth fixing. If it's yes, but differently, you may already have an idea of what needs to change and where a pivot could happen.

But if the answer is no, then you have to ask yourself another uncomfortable question:

Why are you continuing?

Time and money are important, but they are not automatically reasons to keep going. "We've already spent so much" or "We've come too far to quit" doesn't change whether the business is actually working.

My Biggest Lesson

I learned how important listening is.

Listen not to react. Listen to understand, then act.

That is something I would carry into my next startup.

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Part Six
If The Startup Does Fail

If It Ends, End It Well

A failed startup doesn't mean a founder has failed as a person. But once the decision to close has been made, there are still responsibilities to handle.

From what I've seen, some founders simply go quiet because they are ashamed to tell people that the business didn't work out. Three of my close friends have gone through business failures, and all three kept it quiet unless someone asked them about it.

One of them chose a different approach. They announced on social media that the business was officially closing.

For me, that matters. Like any relationship, closure is needed.

Your Startup Can Fail Without Destroying Your Reputation

If the business is ending, I think being honest is better than disappearing. Customers, employees and investors were part of the journey, so they deserve to know what happened.

It doesn't have to be a long explanation. Sometimes you just need to say what happened, what is happening now and what comes next.

Let the news go out. Carrying that baggage won't make it easier to move forward.

What You Owe Your Employees, Customers and Investors

For me, it is simple. Be honest.

Tell people the truth about what happened and what commitments can still be honoured. You don't need to pretend everything went according to plan.

People who trusted the business deserve that honesty.

Don't Let a Failed Business Create Failed Relationships

A failed startup doesn't automatically mean failed relationships.

If you handle the situation responsibly, those same people could become future investors, co-founders, employers, customers or supporters of your next company.

For me, that's part of responsibility. Knowing how to stand back up matters.

And if you have already burned some bridges, you may need to step up and build new ones.

The Difficult Co-Founder Conversation

This is where things can become personal.

When a business fails, I would rather say "our company failed" or "we failed" than "you failed me."

I've had disagreements with my co-founders too. One thing I keep coming back to is what I mentioned earlier:

Listen not to react. Listen to understand, then act.

A failed business can teach you a lot about business. It can also teach you a lot about the people you built it with.

My Biggest Lesson

"If my startup failed tomorrow, the one thing I would want to remember is the reason why I started the business and the reason why I failed."

I would want to learn from that failure, carry the why I started with me, and use that lesson to start again.

Lesgo!

Part Seven

Don't Waste a Good Failure

Failure by itself doesn't automatically teach you anything. You have to look back at what happened, understand where things went wrong and actually change something.

When we started our clothing business, I thought of the best. I thought we would become a brand that customers would prefer. They would like our designs, buy from us and the business would grow. Eventually, I imagined us having our own office and equipment.

That wasn't exactly how things turned out.

The business moved slowly. We had a lot of setbacks, funding problems and eventually the team started losing its fire. What surprised me most was how difficult it was to maintain that same spark from the beginning all the way to the end.

Run the Post-Mortem While the Evidence Is Fresh

Looking back, some of our assumptions were simply wrong. We thought we could dominate the market, but more competitors came in. That challenged us and, honestly, intimidated us at times.

We also saw warning signs. We became dependent on one customer. We had cash problems. Product development got stuck. There were times when we received customer feedback but didn't act on it quickly enough.

Not everything was within our control. Seasonality, delayed payments and changes in the market happen. But how we responded to those problems was within our control.

That is probably one of the biggest things I would change.

What Would You Never Do Again?

I would listen more.

I would listen to customers before putting too much time and money into a product. I would listen to the team because they may notice something the founder doesn't. I would also pay closer attention to the numbers and act on warning signs earlier.

If I started another business tomorrow, these would be my three decisions:

1. Listen to the customers more.

Don't just collect feedback. Understand it and act on it.

2. Manage the cash more carefully.

Know where the money is going, how long the runway will last and how dependent the business is on a small number of customers.

3. Act earlier when the warning signs appear.

Don't keep telling yourself that the problem is temporary when the same problem keeps coming back.

For me, that is what turns failure into data. You don't just remember what happened. You change what you do because of it.

And I would carry one lesson with me:

Listen not to react. Listen to understand, then act.

Part Eight
What Happens Next

The Second-Time Founder Advantage If You Actually Learned Something

If I were to start another business, I know I wouldn't be starting from zero anymore.

The clothing business taught me things that you simply don't learn by reading about startups. I learned about customers, cash, product development, sales and working with co-founders. I also learned how difficult it is to keep a team motivated when things aren't going well.

That experience has value.

But I don't think simply failing once automatically makes you a better founder. You can fail and make the exact same mistakes again. Experience only becomes useful when you understand why something happened and change what you do next time.

Experience Doesn't Automatically Equal Wisdom

For me, the biggest lesson is listening.

Listen to the customers. Listen to the team. Listen to the numbers. And when the warning signs appear, don't just explain them away.

Listen not to react. Listen to understand, then act.

That's the part I would take with me into another business.

Turning Expensive Mistakes Into Better Decisions

A failed startup can become expensive education.

You might carry those lessons into your next company, a job, investing, consulting or even helping another founder. You know what it feels like when cash gets tight, customers don't respond the way you expected and the team starts losing its fire.

You also know what you would do differently.

And maybe that's the real advantage of being a second-time founder. Not that you know everything, but that you've already made mistakes you don't want to repeat.

If I start again, I would carry the why I started, the lessons from why I failed, and hopefully make better decisions the next time.
Lesgo again!

CONCLUSION

Your Startup Failed. Your Founder Story Didn't.

A startup can fail. I know that because I've been through the uncertainty myself with our clothing business. You can lose money, lose momentum, lose customers and eventually realise that the business you imagined isn't the business you ended up building.

But that doesn't erase everything you learned along the way.

Startups rarely fail overnight. They unravel. The important thing is recognising the signals before the problems become impossible to fix.

At Startup Networks, this is also why I believe conversations between founders matter. You don't always have to figure everything out alone. Sometimes another founder has already been through the problem you're facing.

Look at the signal. Diagnose the problem. Decide what comes next. Act on it. Then learn from the outcome.

Failure Is an Event, Not an Identity

A failed company doesn't automatically mean a failed founder.

You can close a business and start again. You can take the lessons into another company, another career or simply into the next decision you make.

The goal isn't to become comfortable with failure. It's to become better at recognising it, responding to it and learning from it.

And if you're a founder going through that difficult moment right now, don't be afraid to ask the uncomfortable question:

Is this actually working?

Sometimes, that question is where the next chapter begins.

FAQ | Startup Failure

Why do startups fail?

There isn't usually one reason. A startup can fail because customers don't want the product, sales aren't growing, cash runs out, the business model doesn't make sense, the team struggles or the founders don't adapt quickly enough.

From my experience, the important question isn't just "Why did we run out of money?" It is "Why did we run out of money in the first place?" The final problem is often a symptom of something that started much earlier.

How do you know if your startup is failing?

Don't judge the business based on one bad month.

Look for patterns. Are sales consistently dropping? Are customers not coming back? Is the runway getting shorter? Are you becoming too dependent on one customer? Are product problems being ignored? Is the team losing confidence?

One bad month can happen. When the same problems keep coming back for months, it's time to stop and diagnose what is really happening.

Should I pivot or shut down my startup?

Look at the evidence before making the decision.

If customers still see value in what you're offering but something about the product, pricing, target market or business model isn't working, a pivot may be worth considering.

But if demand is weak, money is running out, repeated changes haven't worked and there is no realistic path forward, walking away may be the better decision.

Pivoting isn't necessarily giving up. Sometimes you're just changing the route.

What should founders do after a startup fails?

First, deal with the people and responsibilities connected to the business. Be honest with your employees, customers, investors and other stakeholders.

Then look back at what happened. What did you believe? What actually happened? Which warning signs did you miss? What would you do differently?

For me, this is where the real learning happens. Listen not to react. Listen to understand, then act.

Can startup failure make you a better founder?

It can, but failure by itself doesn't make you a better founder.

You can fail and make the same mistakes again. The value comes from understanding why the business failed and changing how you make decisions afterwards.

If you take those lessons into your next business, job, investment or partnership, then the experience becomes something useful rather than simply something painful that happened.

And that's probably the biggest lesson I would share with founders in the Startup Networks Forum: don't waste a good failure. Learn from it, talk about it and use it to make your next decision better.

CAN YOU SHORTEN AT LEAST 2 - 3 LINES PER QUESTION

Absolutely. I would keep the questions as they are for SEO/GEO, but make each answer much tighter.

FAQ

Why do startups fail?

Startups can fail because of weak demand, poor product-market fit, cash-flow problems, bad unit economics, founder conflict or poor execution.

Often, running out of money is the final symptom, not where the problem started.

How do you know if your startup is failing?

Look for persistent patterns rather than one bad month. Falling sales, poor retention, shorter runway, customer problems and declining team confidence are warning signs.

When the same problems keep returning, it's time to diagnose what's really happening.

Should I pivot or shut down my startup?

If customers still see value but the product, pricing, market or business model isn't working, a pivot may make sense.

If demand is weak, money is running out and repeated changes haven't worked, shutting down may be the better decision.

What should founders do after a startup fails?

Be honest with your employees, customers, investors and other stakeholders. Deal with your responsibilities and communicate what happens next.

Then conduct a post-mortem and identify what you would change in your next venture.

Can startup failure make you a better founder?

Yes, but failure itself doesn't automatically make you better. The value comes from understanding why you failed and changing your behaviour.

As I learned from my own experience, listen not to react. Listen to understand, then act.

GOOD ARTICLES TO FOLLOW

• AI Is Eating Itself and Choking on the Output - AI & Technology - Startup Networks 

• A Hacker Doesn't Care That You're a Startup 

• Nobody Teaches You How to Be a Boss.. So Most Founders Are Terrible at It! - People & Leadership - Startup Networks

Sources
1. Statistics - https://www.cbinsights.com/research/report/startup-failure-reasons-top/