Connect with us

Resources

Why Most Startups fail? 8 Common Reasons

Published

on

man in blue and brown plaid dress shirt touching his hair 897817 scaled

A startup is a company which must grow faster and and should have potential to disrupt the market. To reach this level, there must be a checklist of things that should be in place in order to achieve success. However, almost 90% of startups fail. In this article, we explore various reasons that lead to failure of most startups;

  • Vague Idea with vague business Model

The idea is the actual blueprint of anystartup. This means that an idea must be pecise , staight forward and haspotential to solve a market problem. With a vague idea also comes a vaguebusiness model.  Most StartupEntreprenuers fail to build a good business model that could ensure thecontinuity of their business. Having a good business model, means that astartup should have the capacity to generate revenue and ensue itssurvivability. Hower, without it, most startups fail to find ways to make moneyat scale leaving investors hesitant and founders unable to capitalize on anytraction gained.

  • Failure to build a good team

Running susccessful statups need anorganized, goal diven and well-motivated team in place. Unfortunately, manystartups fail to put together the right team, essential for the success of thebusiness. Some techie startups  wouldhave the technical team comprising of; software engineers and programmers but theyfail to build a top-notch business team, necessary for the pomotion of theproduct. Having a diverse team with different skill sets  is very critical to the success of anystartup. When  founding team can’t putout product on its own, then they shouldn’t be founding a startup business. Itis therefore the role of the founders to  find the right means of  bringing onboard  a better team without incurring moreexpenses.  Usually, the easiest strategyis to be willing to offer a certain amount of equity to  people with attractive skills set requiredfor the smooth running of the business.

  • Lack of market demand

When a startup idea is vague with nophilosophy to serve a market need, it will definitely fail. According to CBIinsights findings, over 42% of startups fail after being unable to solve amarket problem. Many startup enteprenuers especially those from tech-relatedbusinesses spend most of their time in working on the technical aspect of theirproducts while ignoring another important aspect of their business, which is themarket. Understanding the market dynamics and trends before launching a startupis very crucial because it gives an indepth insght of the behaviors of theaudience and the nature of competitors available. Most startups ignore the needsof the market but instead focus on solving what interests the founders. Entreprenuerssolve for the market and not for themselves!

  • Leadership & Management crisis

According to Supper Club, of all thecompanies that failed from 2011 to 2013, poor management was to blame 50% ofthe time. Founders of most Startups lack the necessary leadership skills ofbeing a CEO. In fact most of them could have the technical knowledge of theproduct they’re building but lack the managerial skills to run the company. Foundersmay have great ideas and limitless ambitions but lack fundamental managementability. Running a successful startup requires a good leader who is acquaintedwith a diverse range of responsibilities such as planning, organizing,staffing, and directing.

  • Poor Decision making

Running a startup to the successfullevel needs hardcore decision making capacity, letting you to make the mostsuitable choices for the success of the business.  Many startups fail to balance between makingpriority and non-priority decisions, which leaves the company into anentrappment of vulnerability to fail. Many of those bad decisions include; Badstaffing practices, inefficient organizational structure, lack of qualityleadership, and ineffective communication. Even the slow decision makingprocess can result in valuable opportunities slipping away. Ideally, decisionsshould be made promptly near the point of action and only by qualifiedpersonnel.

  • Lack of the necessary Capital.

Acquiring capital and knowing how to use it is very important in the running of any startup. The fact is raising capital is one of the most challenging issue to many startups. The fact is raising capital is one of the most challenging issue to many startups. According to CBI insights findings, over 29% startups fail because of failing to raise the necessary capital they need to scale their innovation or product. In  2013, Flud; an online social news reader startup shutdown, after failing to raise an additional funding. Despite multiple approaches and incarnations in pursuit of the ever elusive product market fit and monetization, Flud eventually ran out of money and closed down.

Even those startups that get the capital, mastering how to use it is very critical to their success and continuity.  For example, DAQRI, a Los Angeles-based Augmented Reality startup, found itself floundering after burning through investments in excess of $250M and acquiring 4 other entities.

  • Being out competed

Running  a startup is like running any business because competitors will always be there. Despite the platitudes that startups shouldn’t pay attention to the competition, the reality is that once an idea gets hot or gets market validation, there may be many entrants in a space. And while obsessing over the competition is not healthy, ignoring them is also a recipe for failure in 19% of startups. Some startups even get it wrong by tampering into an area;  a premier colony with already established competitors. One of the reasons why Daqri failed was because it faced substantial challenges from competing headset makers like Magic Leap and Microsoft, which were backed by more expansive war chests and institutional partnerships. Successful Startups find a totally unique niche and dominate it with their own innovation before other competitors intrude in. A case in point is Elon Musk’s Falcon Space program, some of the things it does is to manufacture reusable rockets for different space programs. This innovation created  its niche without any competitor and it has successfully dominated it.

  • Contradicting goals & ambitions

Some startups fail because founderslack a clear goal that guide their business or innovation. Some founders evenfail to grasp the fact that, what they’re doing takes entreprenuership spiritto succeed. Contradicting goals come into play when founders fail to balancethe pesonal goals and the actual goals of their own business; something thatleads to total failure. A founder of a startup must look at the bigger pictureto solve the market needs at all costs, even when it means sacrificing theirown personal needs first.

Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Newsletter


Advertisement

Top of the month