With an increased competition in the market there is an added thirst to excel and succeed. Entrepreneurs are gearing up and coming up with their own ventures. All of them are putting in a lot of efforts. There are certain factors due to which the startup doesn’t work out completely or in other terms startup fails. So! What may be the reason for startup failure?. What are the factors being talked above? , the solution to these questions is available through the mentioning below:
- Negligible Market Need – 42%
Tackling problems that are interesting to solve rather than those that serve a market need was marked as the number one reason for failure in a notable 42% of cases. If there isn’t relevant market need then most likely we are on the wrong track. So thinking andanalyzing the market we must launch the product.
- Insufficient Cash – 29%
Once you have started well with proper and concrete funding it is crucial that you don’t spend your cash recklessly which may lead to the said problem. The question of how money must be spent was frequent andreason for failure marked by failed startups (29%).
- Inappropriate team members – 23%
“Anything that develops is due to companionship”. Adhering to this, if the members of the startup aren’t up to the mark then the debacle is sure to happen.
- Victim of out competence – 19%
A combination of details, such as expertise, motivation or funding can lead to one startupout competing the other. While obsessing over the competition is not healthy, ignoring them was also a recipe for failure in 19% of the startup failures.
- Problems related to cost – 18%
Because ofthem the startups come across the problems of underperformance in sales and revenue. Also it may be that inappropriate amount was allocated to the respective domain.
- Impecunious product – 17%
If the prime focus of the founders is not on their product then it is better not to proceed than crying on what actually occurred.
- Business model failure – 17%
Failed founders seem to agree that a business model is crucial; staying wedded to a single channel or failing to find ways to make money at scale left investors hesitant and founders unable tocapitalize on any traction gained. So the appropriateness of the business model is a key issue.
- Lacking marketing skills – 14%
Dr Philip Kotler defines marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit”.
As per the definition, if you aren’t preparing a proper marketing plan which would suffice the needs of the customer then you may be inclined to topple down.
- Ignore Customers – 14%
Customer feedback is very important because they are the ones for whom we are actually developing our product. Ignoring users is a tried and true way to fail. Tunnel vision and not gathering user feedback are fatal flaws for most startups.
- Product Mis-timed- 13%
Launching period of the product matters a lot and is proportionate to its success. So, neither TOO EARLY not TOO LATE should be the motto.
- Lack of focus – 13%
Getting sidetracked by distracting projects, personal issues, and/or general loss of focus was mentioned 13% as a contributor to failure.Focusis key to success and a key to failure as well.
- Discord between team/investors – 13%
Disharmony with a cofounder is a detrimental issue for startup post-mortem companies. But animosity isn’t limited to the founding team, and when things go bad with an investor, it can exacerbate. Maintaining the harmonious relationship is important.
- Pivot Gone bad – 10%
Additional pivot team hasn’t supported the team well when it was actually needed so it led the entire business down.
- Lack of passion and required expertise – 9%
If money is the whole and sole of the entire assembly then getting inordinate results is sure. Necessary expertise into a domain for which the main idea ofstartupwas should be ensured.
- Improper Location – 9%
Being at a location with the inapt conditions and ambience for your product may lead to a downfall. Certain measures need to be taken so that there is less chance of problems due to bad location.
- No financing or investor interest – 8%
This may be the reason as the idea isn’t that flattering and wouldn’t sustain in the market. Tying to the more common reasonofrunning out of cash, a number of startup founders explicitly cited a lack of investor interest either at the seed follow-on stage.
- Legal Challenges – 8%
Sometimes a startup can evolve from a simple idea to a world of legal complexities that can prove to be a root cause of shutting a startup down. A couple of music startup post-mortems associated the high costs of dealing with record labels and legal headaches proved to be a reason for startup failure.
- Do not use your connections or network – 8%
“Get your investors indulged into the process. They are there to assist you. Get them involved from the start, and don’t be afraid to ask for assistance. I think we made the mistake early on of trying to do (and know) everything on our own, perhaps out of insecurity over being so new to the business world. This is a mistake.”(as quoted bykiko).
- Burn Out – 8%
Burn out was given as a reason for failure 8% of the time. Work life balance is not something that startup founders come acrossoftenly and so the risk of burning out is high. Being ambulatory and ability of juggle between the two varied lives may be a solution to burn out.
- Failure to pivot when necessary – 7%
Headstrongness and recalcitrance may bring unwillingness to the startup so it must be taken due care of. Not pivoting away or swiftly enough from a bad product, a bad hire or a bad decision or coordination quickly enough was marked as a reason for failure in 7% of the post mortems.
Source : CB Insights – top 20 reasons for startup failure by analyzing 101 startup failure post-mortems