Here’s Why 99% of Startups Fail (And How You Can be in 1%)

Success consists of going from failure to failure without loss of enthusiasm.

Sir Winston Churchill

Why do so many Startups collapse? Is the burning question on everyone’s mind. Starting a start-up is much more difficult than most people believe. A company that is so in tune with its sector that it can float along with little effort is rare. It’s a sad fact that eight out of ten start-ups fail within the first year of operation. This can be avoided if one is aware of the blunders that start-up founders make.

Key Facts:
  • According to a study by the IBM Institute for Business Value and Oxford Economics, 90 percent of Indian startups fail within the first five years due to a lack of creativity.
  • While the market value of Indian startups has increased in the last four years, 77 percent of venture capitalists believe they lack unique business models, according to the report, titled ‘Entrepreneurial India.’
  • According to a global survey, India ranks among the bottom countries in terms of global innovation. The poor state of education in the country was blamed for the country’s failure to grow, according to the study.
  • India, which is ranked 66th on the Global Innovation Index (GII) list, is thought to have the potential to become a global engine of innovation due to its potential, talent pool, and innovation culture.

Here are several reasons why Startups fail:

1. Market Situation:

Every startup is guided by the market; the market has an unmet need or an opportunity gap that your concept can fill while still making money. However, determining the correct market and problem is not easy. If you create a solution for a problem that no one has or that is trivial, you risk wasting all of your time and money. The demand for a solution is also influenced by the timing of its release. Hotstar would have died if it had launched in 2009 when internet and mobile penetration were still low.

2. Running out of Cash:

Cashflow is essential to the survival of any business; no matter how passionate you are, how many users you have, or how brilliant your idea is, you must pay your staff, marketing agencies, and bills. Some business owners struggle to keep track of their finances and, as a result, fail to take appropriate action in a timely manner. The founders of companies that are financed by private equity firms and other external investors should be acutely aware of the Key Performance Indicators.

3. Disharmony in the team:

A diverse team with a wide range of expertise is key to a company’s success. Many entrepreneurs are unable to do what is needed for a company to succeed. Both the founder and the team should concentrate on sectors that are relevant to their expertise and education. Their abilities should be supplemented by those of the team. Discord in the team could hinder the company’s growth. Discord among a company’s investors may often lead to the company’s failure.

4. Lack of Focus:

Founders are people who have a lot of ideas and sometimes get carried away by them. This could cause distraction and resource loss in serious businesses. Some startups attempt to diversify their products too quickly or concentrate on too many items at once. Micromanagement may also contribute to a lack of concentration.

5. Do not be concerned about rivalry:

Any company is likely to face a lot of competition from competitors. Startups, on the other hand, should not focus too much on the market. This isn’t to say that businesses shouldn’t be concerned with competition, but it shouldn’t be to that extent. Over-concernedness and ignorance should be balanced.

6. Failure of a Business Model:

A business model is concerned with determining a scalable method of acquiring and monetizing customers. The skeleton of a company is the business model, which determines the commercial and economic viability of your company’s ability to generate revenue and value. Some businesses are so focused on the solution that they forget about the business model. High cost to acquire a customer, low or uncertain lifetime value of customers and no scalable ways to acquire customers are all characteristics of an inefficient business model.

7. Poor Marketing:

A great product will fail if it isn’t backed up by sufficient marketing efforts. Nowadays, marketing isn’t just about increasing awareness of the product’s features; it’s also about incorporating marketing elements into the goods themselves and exploring uncharted territory like influencer marketing and retargeting. The company should concentrate on attracting customers’ interest and turning them into leads. A good company’s most valuable skill is this. If the company or entrepreneur fails to successfully market the product, the business will not develop as planned.

8. Ignoring the needs of consumers:

It is important for a startup to develop products and solutions that are in demand by customers. Customers’ interests should not be overlooked, whether on purpose or by mistake. Receiving input from users at various stages of product creation and testing does not harm a company. Customers will become addicted to the next versions of the goods and services as a result of it.

Startup Stats:

  • Around 37% of businesses fail due to a lack of funding or profitability.
  • Due to Covid-19, 77 percent of startup founders believe they will fail in 2020.
  • The most active entrepreneurs are those who are focused on making an impact.
  • 4.4 million new companies started operating in 2020.
  • Only 40% of startups are able to become profitable.
  • The research concludes 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.

Bottom Line:

Startups are unquestionably risky, but with great risk comes great reward. Potential not only in terms of financial returns but also in terms of growth and creativity that could change people’s lives all over the world. So, don’t let the possibility of failure deter you! Dare to be different!

  • You have a lot of potential. There is a free and open road there.
  • Rather than failing, choose success.
  • Customers are more important than goods.
  • Choose internal validation over external validation.
  • Rather than doing it alone, form a balanced squad.
  • Predictable development is preferable to “too fast, too soon.”

If you can avoid these blunders, you’ll be well on your way to being a big star.

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Abhiraj Vaidya
Articles: 12

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