Why Startups Fail
Turning ideas in to business is a dream for not all but many of us but it is also an unfortunate reality that hundreds of start ups die at an early stage of their birth. Though the founders and co-founders always seem confident of their ideas and abilities but they do not know that funding and incubators alone cannot help them in moving on ramp which is already overcrowded by innovators who do not actually know the fate of their ideas.
The swift rise and fall of America’s fastest growing company is an inside story of Tablet maker Fuhu which after remaining №1 on Inc. 500 list for two years went bankrupt. Though it was said that slim profit margins of company could not cover its overheads but the actual story of failure was product misfire. When Fuhu’s Dream Tab flopped the company made another bet on $500 big Tab without doing market research and the result was $60 million Foxconn bill (Distributor of Fuhu) which vanished the dreams of founders to go for an IPO.After Fuhu’s distributors ceased shipping products in 2015 the company got $10 million loan from private equity firm Tennenbaum Capital but to utter surprise of its founders one day the balance in their account which was 4,512,662,53 just day before was $0. Tennenbaum swept their bank account after Foxconn cut Fuhu’s product supply. This is the story of startup whose sale soar to $196 million in 2013 just three years before their bankruptcy. The startup survived for six years and was finally declared bankrupt in 2016.
Everything me was an Israeli app launcher developed by Duet Media a company that was founded in 2010. The company’s primary product, their Android home screen, was ranked in the top ten for its type in over 40 countries. Through the built-in suggestions in their app, they paved the way for a million downloads a month for their partners. With all their success they were unable to turn these impressive numbers into a successful business.
The closing of the company is not a reflection of the three entrepreneurs, who worked for five years on different products and tried a diverse set of business models in an attempt to grow their startup. It is important to note that it was out of a sense of responsibility for the team members as well as their investors’ remaining funds the company decided that in spite of their impressive accomplishments including 15 million installs throughout the world without a viable business model, they had a responsibility to shut down.
Autopsy has 149 different stories of entrepreneurs who either failed at the beginning of their venture or failed to scale up their startup within first 4–5 years. Most of the startups failed only because of wrong approach and wrong target market. While lack of vision and unsustainable business models were also among the causes of failure.
I always advise new entrepreneurs to beta test their idea to find Idea Problem Fit as they do with their product before product launch. Right team with right product for right market could have the possibility of survival as compared to a startup soared with funding but lacking the right direction to go for.
