Michael Gibson: Why Startups Fail

Unpacking startup strategies, failures, and founder growth with the Co-Founder of 1517 Fund.

Michael Gibson, the co-founder of the venture capital fund 1517, is celebrated for his unconventional approach to investment, focusing on backing dropouts and those outside the traditional academic sphere which stems from his background in serving as vice president for grants at the Thiel Foundation.

Highlighting the importance of these early decisions, Gibson noted— in his talk at Discipulus Ventures Cohort I— that startups often face make-or-break challenges right from inception. The initial composition of the founding team, for instance, can dramatically influence the future trajectory of the company. Gibson’s advice was straightforward: forge partnerships with individuals you trust deeply.

According to Gibson, there is one important factor that contributes to the fall of a startup: the founders’ failure to understand the concept of product-market fit. The stark reality is, is that many startups fail because they create products that do not meet a significant market need; hence, founders must rigorously validate their market assumptions and continuously adapt based on feedback, ensuring their product significantly improves upon the status quo. Essentially, the journey from an idea to a sustainable business model is a series of strategic scaffolds. Founders need to secure funding in stages, aligning each round with key technical and market validation milestones which not only helps in minimizing risks but also in maintaining the credibility of the startup.

But most importantly, startups are not just business ventures; they are profound journeys of self-discovery and personal evolution. Founders face numerous challenges that test their resolve, adaptability, and ability to handle interpersonal conflicts, often mirroring the operational hurdles of the startup itself. As documented in Tom Wolfe’s The Right Stuff, founders must adopt a mindset of extreme ownership and view their startup ventures as vehicles for personal and professional transformation.

Navigating the high-stakes, high-reward paths of hard tech and manufacturing is as much about personal growth as it is about strategic execution and market conquests. Especially in hard industries in the American Dynamism practice, commercial success doesn’t come without personal fulfillment and transformation.