Tuesday 28 February 2017

Top Reasons Why Startups Fail

There is little doubt in the fact that launching a startup is an uphill task. Making it successful is another story altogether. Startups are considered to be responsible for changing the face of technology. There have been countless stories around us which narrate tales of inspiration and the journey to achieving astounding success.

However, scores of startups have closed their shutters and have been razed to the ground. Statistics reveal that nine out of ten startups fail. Why do startups fail? Here are some interesting reasons outlining the prominent reasons for the failure of startups. They need to work harder and smarter.

Lack of new ideas

In any business, new and innovative ideas are the backbone of making it successful. An extensive research of the present scenario of your target marketplace needs to be done in advance in order to mark an impactful presence. The prospects, current conditions and the possibility of how well your ideas can change the existing scenario-everything needs to be analyzed and well planned.

Working with a vision for the future becomes quite essential in this ever changing world. Ignoring the market realities can put your hard work and efforts in jeopardy. Analyze and envision the future for introducing and applying your new ideas within your niche. Bring unique ideas to the table for bringing about a major change.

A lot many times, startups run into major breakdowns due to the fact that they find little or no market at all for the product/service they launched. It can also happen that the market is years ahead or behind your perception and the market conditions are not yet prepared for receiving it for making it successful.

Financial Issues

Setting aside money to run your business is a sensible thing to do. Making provision for this type of arrangement for minimum one year is ideal. This should include the money required for paying worker’s salaries, operating expenditures etc. It will ensure that the company stays active for the first year without any money problems.

The fact is that for the first year, a majority of startups don’t make much. Huge profits start to accumulate only after few years of starting out. Even if you have to borrow money from a bank in the form of loans, make it minimal to avoid that gloomy feeling in the beginning. Avoid the blunder of going into a spending spree. Finances should be properly tracked and managed sensibly and put into control appropriately. Do not hit the accelerator pedal when it comes to spending. Set the pedal lightly and conserve your cash wisely for avoiding fast burnout.

Team not up to the mark

The top management team has to coordinate with the rest of the team to produce spellbound results and to remain on the path of steady growth for the company. You need experienced and talented people. A balanced team with the right set of people is required. If team members lack coordination and there is a lack of understanding amongst them, it can be a major cause of discontent and result in sluggish growth.

In fact, in many organizations, management teams fall apart and just don’t get along well with each other. Weak management teams fall short of new ideas and they seldom work with unity. Weak strategy building is a lacuna for idea generation. If the product doesn’t get launched on time and has flaws which still need to be sorted out, it leads to poorly managed implementation and execution.

Lack of Marketing Efforts

Never treat the sales and marketing domain as something of secondary importance. Tracing history, the fact is that there have been brilliant products which miserably failed in the market due to poorly planned sales efforts or a sluggish sales team. Many startups lack the knowledge or vision to market their products well so that people are informed about their presence in the market. Therefore, focusing on building a strong sales team and investing in your marketing efforts should be given prime importance. Weak marketing and sales efforts can be one of the reasons for avoiding catastrophic failure.

Failed Connections/Poor Networking

Entrepreneurs also tend to complain about their lack of networking and having a well-connected network of people within their industry. Failing to build new connections is a must while building new connections through old ones is surely a talent and it is not very difficult, though it is quite productive. Sometimes startups fail to recognize the potential of their own existing network.

Another good way of building networking for creating an identity of your product in the market is by using services of PR agencies. Since such agencies already have a relationship with major media outlets and high authority blogs within the industry, they could prove to be a great asset in promoting your voice about your startup. It’s worth investing a bit on few of them for effective results in the future.  


  1. I would add that, in my experience, too many ideas, not a lack of, is a main contributor to start-up mortality: new ideas pop-up and a lack of focus dilutes the effort, producing a mediocre outcome.

    The single largest killer of start-ups, in my opinion is not listed here, and that is a barrier to entry or "moat". You have to have something that bottlenecks the competition from cloning and leapfrogging your efforts. That may be deeper pockets, technology, special/scarce talent or simply a healthy head-start. Most ideas are difficult to come up with and relatively easy to clone once made obvious. Without a moat, or a thought out barrier to entry strategy, you a be a dead enterprise walking...
    Bryan Cockel

  2. I think most startups are failing today is because they are raising too much money before even having a working business model and in business its the days with empty pockets that teaches and grow the business.

  3. Based on the experiences of the last 25 years, we see that startups and scale-ups are often failing for the same reasons. Most of the time it is not the lack of financing by the way.

    The same thing applies to Fintech, RegTech and other startups and scale-ups in Financial Services.