Important Reasons Behind Failure Of Startups

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According to Forbes, 90% of startups fail. 

Startups don’t fail because they’re startups. They fail because of their founders. Founders fail because they can’t admit when they’re wrong, they want to believe they have it all figured out, even when they don’t, they want to be seen as the smartest person in the room–and not seen as the student.

42% of startups fail because they didn’t solve a market need.

Focusing only on building and not solving a meaningful problem for customers is the main factor why startups fail.

60% of startups survive to age 3 & 35% survive to age 10.

Few top reasons why startups fails could be,

● Lack of focus

Smart people want to try many new ideas, but a resource-constrained start-up does not have the luxury to try all cool things.

The leadership is unable to set a clear strategy for the company and stick with it long enough to succeed, resulting in a lot of wasted money and energy from constant changes in direction.

● Too ambitious

Start-ups should be targeted on one user need – just tackle one market, one user segment, with one compelling feature that solves a real user need.  After proving a concept with a small group of users, you can then expand to more users.  Then, you will be well placed to discover more user needs to expand your product iteratively.  This is the “lean start-up” methodology.

● Entrepreneur doesn’t scale

Starting a 5-person company is very different from managing a 100-person company.  To scale up requires either an experienced entrepreneur or one who is able to scale up quickly.

New business owners often lack relevant business and management expertise in the areas of finance, procurement, sales, production, hiring and management of employees.

● Team trust issues

Founders generally prefer team members who have known each other for a long time. Teams lacking trust will be severely challenged by both failure (how to downsize and what to cut) and success (how to divide responsibilities and financial upside).

● Poor execution

In the “lean start-up” environment, a good start may be copied easily by others. So you must be able to execute dependably and quickly. Your product needs to be updated on a weekly if not daily basis. Your leadership is maintained not by brand or by IP, but by your continual ability to execute and lead the pack.

● Technology looking for solution

Rather than a solution for a user pain looking for proven technology. A good entrepreneur realizes that what matters is not the cool technology, but the value to users.

Most startup founders do not fully understand what their product might be able to achieve in the market – especially in the early stages.

● Lack of skills needed to win

It is important that the founding team have complementary skills, not be too large, be sacrificing equally to build the dream, be flexible and coachable, and finally have a bias toward action.

● Lack of Funds/Cash

A common fatal mistake in many failed companies is the lack of operating funds. New business owners often don’t understand cash flow or underestimate the funds they need to start a business, and they may also have unrealistic expectations about sales revenue.

“Less showing, more doing” should be the motto for startups. Good Luck!

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