Since the last decade, becoming a startup founder seems to be the next big thing. Now everyone with decent work experience wants to be an owner or a CEO or a CFO. However, with the changing face of the business, many start-ups are failing, sometimes mysteriously and sometimes unnoticed.
So, why start-ups fail? There are numerous reasons for it, and here I’m pointing out some of them so that you can be well aware of the reasons.
No Market Need is one of the biggest reason for failing start-ups. A lot of the companies start with a great idea and start building the flagship product according to their vision. Sadly, when the product is released, most of the time, it’s either late or overpriced. Then the market doesn’t respond accordingly, which makes it easy to blame on the market.
Focusing on Viability is also important for any business. Many start-ups fail to determine the viability of their product timely, which ultimately disconnects the product from the market. A company may have the best product in its kitty but it needs to plan well before launching it in the market.
Many start-ups Run Out of Cash, which eventually leads to the failure of the company. Most of the time companies run out of cash when they receive too much funding and start spending it recklessly.
Without enough money, a company cannot strive in this competitive market and here Lack of Financers hurts a startup most. Additionally, lack of financing and investment may indicate that the idea of the business is not presented in a way so that it can gain some interest.
Choosing a Proper Location is very important for a startup. One must start a company in such a location where the founder can get necessary talent and ideas, alongside right audience who will entertain the startup’s product.
A startup must focus on building a Good Product. If the primary focus is not on the product then the user would be disappointed and the company will have a hard time getting back user’s faith in its product.
Poor Marketing often hurt startups more than anything else. Some founders think a great product will advertise itself, and finally, they end up marketing it to the wrong audience through wrong channels.
Often co-founders start fighting to get more equity. Many startups with great response from the market failed quickly due to the Battle Over Equity. Equity determines how much of the company a founder own, so fight over equity is quite common in any startup.
Everything needs to be Documented, as there’s no guarantee of mutual trust or oral agreements. In many instances, founders backstab their own team members. Once passionately exchanged ideas can turn into a weapon of backstabbing.
Raising Funds at Right Time is a very important part of any startup. Most of the startups raise funds very early, even when they don’t need it. This early fund raising eventually leads to unplanned expenditure and low output. Ultimately due to these issues, the startup no longer gets the second round of funding and fails.
Just like any sports, a startup also thrives on the team game. Everyone including the founder of a startup must show some Commitment towards the company. In most cases, a less committed founder is more likely to quit when going gets tough.
So, these are the top reasons of failing start-ups. If you are planning to open a startup then you need a plan, persistence, perseverance, a brilliant team and you need to be flexible enough for any situation. Above all, always invest some time to listen and learn, which will be the best way to keep your startup running.
– Kaustav Roy