Why Do Startups Fail? Some Interesting Post-Mortems With Top Reasons

Why Do Startups Fail Some Interesting Post-Mortems With Top Reasons

“Starting” and “Running” a company are two different ball games. Anything might go wrong while running a company. Unexpected emergencies, the key employee leaving the organization,  severe cash flows issues, employees’ attitude can put you out of your own business.  Are you prepared to take these and still move forward?

Building a multi billions dollar company doesn’t happen overnight. It takes years to develop the business. After years of struggle, one gets to share the success stories with the world outside.

Why Do Startups Fail Some Interesting Post-Mortems With Top Reasons

In every success story, you will find one key person who took:

  • A courageous decision
  • Remained comfortable or focused in times of discomfort
  • Enjoyed the work to reach Excellence
  • Continuous Learning
  • Trusted the Gut feeling
  • Visualized and made it happen

The following individuals are perfect examples who turned their failures into success in different fields:

  • Walt Disney was criticized for lack of creativity
  • Steve Jobs was fired from his own company
  • Amitabh Bachchan rejected by All India Radio for his voice and was also a struggling actor
  • Critics attacked Michael Jordan saying he can’t shoot and play defense in basketball
  • Stephen King received several rejections from publishers

These entrepreneurs started with nothing and made it to the list of successful entrepreneurs. There are many companies which are successful now after going through a series of failures in the past.

Let’s find out the significant reasons for tech startup company failures:

1. Not serving Market Need
Converting ideas into actual product or service takes time. Many startup companies fail to conduct market research. They concentrate only on developing the excellent product. Finally, the product fails as it was not fit for the market. Before diving into the market, kindly analyzes market trends and patterns considering future requirements.

2. Running out of cash
An essential role of the entrepreneur is to keep track of money used and cash Left. A company must achieve a series of a milestone to apply for financing.  Many startups don’t have an idea of how to raise money from investors. Many, a time alternate source of earning matters to develop a successful product. Sometimes connection, an excellent presentation, or solid team can help.

3. User un-friendly product
Entrepreneurs become so focused and develop product considering their own vision. They fail to validate their creation with the customer knowledge. Imagine a game lover needs to write codes to enter next level of the game. It is challenging and beyond user experience. So build a product which a layperson can understand and use it.

4. Not the right team
Many founder members fall apart as soon as first strategy or product fails.  A lot of VC companies put heavy emphasis on the team. Starting a company should with diverse team bring more skill set to the enterprise. This help to complement each other weakness with each other strength.

5. Choosing a market that is too small
Many entrepreneurs select the market that is too narrow. If the target market is smaller then business won’t be able to scale up. Sometimes it work for niche products .

Many newly startup restaurants wipe out because of this reason. This may not be the case for highly priced solutions. Identify your markets by asking

  1. Is your service seasonal?
  2. Will your customer keep coming back and forth for the product?
  3. Will it be impulse buying or will it take a long time to close a deal?
  4. How will your customer reach to you – Online or Offline?

6. Failure to anticipate a change in technology or competition?

The market is ever changing. It is a huge risk if you are assuming that product worked successfully in the past, so it will work in the present. Be open to new technology and advancement in the area of experimentations.  Think how competitions can be handled in a different way.

For example- Nokia failed to recognize the transition change in the smartphone.

7. Wrong Location
The location is critical for your product success. Sometimes a product might fail in one location but might be super successful in another place. A bad location can spell disaster to your efforts and hard work. So before launching your product, test Minimum Viable Product. This would help you understand preferences of your customer towards your product. For example – Mac Donald realized that India is not a place to sell hamburgers instead they came up with vegetarian burgers.

8. Started company for wrong reasons
What would be the sole reason for starting a company?

If your answer is:

  • Only to make more money.
  • Frustrated working with bad boss.
  • Need to work fewer hours compared to the previous job.
  • Don’t want to work under “ ”

Misinformation can make your business eventually fail. However, Inner Drive, Determination, Patience and Positive attitude can make bring better chances of entrepreneurial success.

9. Overdependence on a single customer
Business owner feels great after getting the first client. Is your company’s revenue generated from a single company? Then you are at mercy as well in the risky position. Losing the customer means closing the shop. Diversifying or having an alternative source of earning could bring rewards. Many small startup software companies wipe out because of these reasons.

10. Ignoring customer feedback
Ignoring customer feedback could be fatal for the business. Feedback answers customers’ expectations, flaws, and efficiency of the product. Startup companies should focus and adapt itself to their needs. Sometimes entrepreneur way of thinking might be proved wrong by considering the input of the customers.

One must pen down a failure post-mortems to tell the community what went wrong.

It is not easy to achieve mega success in running a business. Many billion dollar companies are operating in losses. There are many successful stories who overcame their failure. So failures could be temporary setbacks for a bigger and significant success in future.

Failure is not the end; it only means that you are on the road to success. Every successful business would have faced a setback. Failure punches your guts feeling. Either you choose to listen to your critics or keep pushing forward to fulfill your dreams.

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