5 reasons that lead to the failure of a startup

According to a report released by Startup blink, a global startup ecosystem map with tens of thousands of registered startups, Indian startup ecosystem ranked at number 37, with its top three cities being Bengaluru, New Delhi, and Mumbai. The first three spots in the global country rankings were of US, UK, and Canada.

Asian countries too saw an entry that was led by Singapore at 10th place, followed by China at 12th, South Korea was at 17th, and Japan was ranked 20th.

For the Indian startup ecosystem, the past five years have been a roller coaster ride. From investors opening their wallets in 2014 and 2015 to them tightening it by the end of 2017 that led to progress slowing down for some and for others, it meant, closing their new venture.

According to a study done by IBM Institute for Business Value (IBV) based on a survey done in collaboration with Oxford Economics last year, more than 90 percent of start-ups in the country will fail. With this percentage being huge, let’s find out 5 reasons that lead to the failure of a startup-

 

1.No Market Need

Sometimes startups get so engrossed in their idea that they fail to understand that the market doesn’t need their product or service. This mainly happens when the new business doesn’t test waters prior the launch that helps validate hypotheses and assumptions if any. Another reason is that seldom the industry isn’t ready for it or maybe it doesn’t need the product or service at all as it is doesn’t solve a big problem or an obstacle encountered by many people. Therefore, getting delusion to the market needs is one of a major factor that kills startups.

 

2.Lack of leadership skills and team cohesiveness 

This is considered to be one of the main troubles faced by startups. In India, many new businesses have been established by people under 35 years, with less experience to run the show. However, age isn’t the criteria for failure but not being able to recruit and handle a team, keep them motivated and deliver as per expectations lead to instability and thus, letdowns. If starting a venture is hard then leading and navigating around both business and people problems are something a startup should learn or else, the company will vanish.

3.Cash Crunch

No business can run without cash hence, done and dusted with your own savings, being unable to raise funds at the right time or worse, running out of the fund raised can shut the startup sooner than expected. Therefore, be wary of ongoing expenses, lower profit margins and product turnaround time, all these things can lead to an unexpected debacle of the startup.

 

4.Ignoring the Competition

When starting a new venture, it is easy to get blinded by your own journey and in this process ignore the competition. The minute an entrepreneur believes that no one does it better than him or her and the way they solve that particular problem is the best way, fall down happens. It is thus important to be aware of the competition and knowing their strength at all times. A smart businessperson will find a better way to challenge the opponent than getting succumbed to them. Ignoring the competitor will lead to the failure of a startup.

 

5.Poor Marketing

Poor marketing is a major reason a lot of startups fail. If, you have a good product or service then telling the world about it is essential. So, market properly and don’t assume that the product quality will give it the start it deserves. In the plethora of products available, making yours stand out and spreading the word about it requires a good marketing strategy. Inability to do so will get your company on the list of a has-been in its space.

 

Starting your own venture may seem fun, but one slip and it’s easy for your company to be off track. Therefore, we recommend on being careful at every step and taking a decision, even hard ones at times to keep the momentum of your business going. The above 5 reasons that lead to the failure of a startup that was started with so much passion and vigour. So, be vigilant and walk the path of success and thereby, contribute to the success of the Indian ecosystem.

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