5 Reasons Why Some Startups Fail

By  |  September 10, 2018

We hear a lot about start-ups failures, and we can’t help but wonder why such situations happen.

When you tell people about a startup idea or when you go online to research the market, you find out about numbers and statistics that show different startups failure.

You don’t have to feel nervous about these statistics; you just have to ensure you do all you can to prevent mistakes that can lead to failures.

Credit: Giphy.com

Just because some startups fail, doesn’t mean some don’t succeed.

So why do some startups fail while others succeed?

Here are some of the reasons why startups fail:

Funding: Funding is one of the top reasons why startups fail. If there is no money to fund your business and run the daily operations of the company; how will the business survive? To solve this, you can apply for funding opportunities, enter pitch competitions like UberPITCH, get loans from friends and families, join accelerators or incubators, etc. According to StartupGrind, one of the reasons why Purple Squirrel, a platform aimed to bridge the gap between students and industries through tours and workshops, providing future professionals with a deeper understanding of their career options failed was because of lack of funding. StartupGrind reports that ‘Purple Squirrel raised USD 300 k in two rounds of equity funding, but they failed to hit their target of 30 crores by 2016. At one point the company was burning 1.2 crore – the equivalent of around USD 200 K – a month.’

No market need: According to a research carried out by CBINSIGHTS, “Tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 1 reason for failure, noted in 42% of cases.”. If you don’t solve a problem your target audience is facing, how do you expect them to pay for your product/service? You have to provide value, and your target market has to be willing to pay for the value you provide. To solve this, you have to research your audience and know what they need and if they can afford what you have to offer. According to CrunchBase, the lesson learned from the failure of Juicero, inventor of the home cold-pressed juicing system is this, “User test your pricing and product before going to market, and respond to feedback.” Nairametrics also reports that “If there’s no need or demand for the products and services you are providing, then your startup won’t be around for long.”

Marketing: It is not enough to have great products/services if nobody knows about them. You have to be able to market your business to your target audience, using the right communication channels and content. Marketing is not just for some company; it is for every business. You must know your target audience and how to attract their attention and then turn them into customers.

Team: You have to ensure you choose the right people on your team. Your team members have to be passionate about your brand and ensure they are committed to the betterment of the company. In addition, trying to do everything yourself without hiring the best hands or outsourcing necessary tasks can cause failure.

Lack of innovation: Your product/service has to evolve and meet the market needs continually. You have to be innovative and come up with things that market needs and adapt to trends and new technologies. Collective Campus reports that Blockbuster failed due to lack of innovation. It states that:

Blockbuster (1985 – 2010)

Home movie and video game rental services giant, Blockbuster Video, was founded in 1985 and arguably one of the most iconic brands in the video rental space.  At its peak in 2004, Blockbuster employed 84,300 people worldwide and had 9,094 stores. Unable to transition towards a digital model, Blockbuster filed for bankruptcy in 2010. In 2000, Netflix approached Blockbuster with an offer to sell their company to Blockbuster for US$50 million. The Blockbuster CEO, was not interested in the offer because he thought it was a “very small niche business” and it was losing money at the time. As of July 2017, Netflix had 103.95 million subscribers worldwide and a revenue of US$8.8bn.”

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