6-Reasons-Why-Startups-Fail---bizTrailblazer-Blog

6 Reasons Why Startups Fail

Every one of us has that friend, who aspires to launch a start-up, with dreams of becoming the next Elon Musk. However, the harsh reality is, most of the startups fail. The common number of the startup world would always point out that only one in every five million non-funded startups attains the unicorn status. And when it comes to funded startups, one in ten thousand becomes a unicorn. Still, there’s a silver lining, and often these failed startups serve as a cautionary story for entrepreneurs.

So, below we have analyzed a few reasons and most common risks which often leads to the failure of a promising startup.

Good Idea, Bad Business

Most of the startups that failed, have pointed out to a very weak business model. If you can’t make a business, profitable or scalable, then your business will fail, no matter how good your ideas are. If the founder or the co-founder lacks the skills or abilities that are needed to get the company going, then he/she must identify those lacking skills and should gain the knowledge in order to get an upper hand against the competitors.

Not Understanding the Market

Most startup founders believe that their product is so unique that the market will beg for their products and cash will start to flow from every direction. Most of the founders don’t really understand the capabilities of their product- especially in their early stages. So, this is the reason we often witness, many companies to change their product line up just to satisfy the market and to stay in business. However, if these startups could at least test their product before the launch, then the failure and market rejection risk will go down significantly.

When the Market is Not Ready

Few companies launch their products even before the market is ready, or even when the technology is not there yet, whilst some of the companies are too late to jump in the bandwagon. In situations like these, the key factor is always to question yourself, when the sales are not taking off. You are the one, who can eventually decide when is the best time to stop a loss and change the direction of the company or if it needs some more time, investment, and efforts to start making profits.

Why-Startups-Fail---bizTrailblazer-Blog

Criticism is a Good Thing

Many of the founders are often reluctant to let others test their prototypes until it is reasonably ready. However, most startups fail just because their founders or leaders are reluctant to get feedback from potential customers. If you are not listening to your customers, then you’ll never know what they want and your company is destined to fail.

So, don’t be afraid of someone stealing your idea or showcasing a half-baked, crude prototype, which has too many imperfections. If you make a few of those prototypes, that are far from perfect and have them tested, then it’ll put you in a product improvement and learning loop that will be repeated until the product sees demand from the potential clients.

A Startup Must Avoid Cash Burn

Most of the startup founders are either engineers or technicians at heart, very few of them have the needed experience of starting an organization. So, they always try to build the perfect product and launch only after that. However, it can be a major problem, when you need to grab all the cashing opportunities that come your way just to keep the business running.

In order to prevent the cash burn, you should identify the areas from where you might end up burning cash. The more your company sees situations like high payroll costs, low-profit margin, delay in payments, and small recurring purchases, the more your company is stretching its treasury. So, always try to spend on essentials rather than spending extravagant amounts on unnecessary items during this phase.

Raising Capital is the Need of the Hour

Raising capital is one of the most important parts of any startup. Many people don’t have a clue about how many rejections they might face before they succeed to raise any kind of capital. Most of the time the founders start this process too late and they go with a wrong group of investors.

The more you are in the market for the process of fund-raising, the more you know, what you want as a company and what the investors want from you. So, a committee of few, who know a thing or two regarding fund-raising, might help you in the long run.

At last, I can only say premature scaling up a company, being a one many army, and obviously lack of focus often leads to failure of a promising startup. So, if you are able to prevent these mistakes, then you’ll be setting yourself up for a major success story.

Share Now

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on pinterest
Pinterest
Share on whatsapp
WhatsApp

get your ad spaces

BizTrailBlazer---400X700-Ads

explore other articles

BizTrailBlazer-Blog-Syfe-A-Singapore-Based-Robo-Advisor-Raises-18.6-Million-Funding

Singapore based start-up Syfe, which wants to make investing more accessible in Asia, has announced that it has closed an $18.6 million Series A funding from a fintech-focused investment firm …

5G-and-Its-Truth---Top-5-Myths-Debunked---BizTrailBlazer-Blog

The 5th generation of high-speed mobile data, also known as 5G, is now live in multiple locations of the UK, Australia, and the US. However, since the first day of …

BizTrailBlazer-Blog-How-to-Build-a-Strong-Ecommerce-Strategy---Beginners-Guide

Do you know how to build a strong ECommerce strategy for your business? The COVID-19 lockdowns have forced many businesses to consider their eCommerce options as an alternative to supplement …

BizTrailBlazer-Blog-How-Bitcoin-is-Mined---A-Complete-Guide

There are high chances that you’ve heard about the phrase “Bitcoin mining” and that is the reason you have searched google with a term like “how Bitcoin is mined” which …

you may also like

BizTrailBlazer-Blog-How-You-can-Avoid-Ponzi-Schemes

Are you someone, who would like to jump at any opportunity to put your money into such an investment, that promises you to give a market return that is too …

BizTrailBlazer-Blog-ByteDances-TikTok-Global-Planning-for-Public-Offering

ByteDance, TikTok’s parent company said that TikTok Global will soon launch a public offering of shares in order to enhance the governance structure and transparency for the firm, which will …

BizTrailBlazer-Blog-15-Celebrities-Who-Use-CBD-oil

CBD products! How many of us heard the term even a decade ago? Very few. Right? However, in recent years the international CBD market has grown by leaps and bounds …

BizTrailBlazer-Blog-Remote-Working-Tips-for-Beginners

We are in the midst of a flexible workplace revolution. Not only Covid-19 has hit the world with its disastrous effects, but it has also effected people’s minds and brains …