Why do most start-ups fail?

One might google the question and look for answers. The points mentioned in the fervently googled ’N’ number of websites are, however, exactly the same (where N is a large number). Indeed, most people would follow these tips accordingly while some trailblazers would make their own way. Yet, we just have a handful of winners who make it big on the front: a very few individuals whose names get recorded in the golden book of success, whose case studies are conducted in B-schools and who end up delivering a lecture on their life story in a technical institution.

So now again the underlying question: Why do start-ups fail?

Tricky question. Unfortunately there is no exact answer. So before the reader delves into the deeper realms of this blog, I would advise the more business-minded and technically advanced personnel to refrain from it as for what I am about to share is purely based on my innocent observations.

In order to simplify the coming points, let us consider a start-up not as an entity or organisation but as a fragile human being. It can be like any other old vagabond, desperate to live and too close to death or it can be like Emperor Palpatine, fragile yet the ruler of an entire galaxy and a dark vessel of the entire dark side of the force. So here are some of my basic observations:

• Start-ups fail when people think too small

An idea is the soul of any start-up. Without the soul, there is nothing in it. So don’t create a product that does not cater to a large audience. Sure you can start local and expand later, but is your product solving the needs of a few hundreds? Is your idea scalable to the next hundred thousand? If not, you’re just selling an item and not building a business.

• Start-ups fail when the core team is mediocre

The core team is the back bone of any company. It is the executive part of the start-up which formulates any decision and hence develops a working model of any business. If the members are slacking, so will be the product. It should always be remembered that : Don’t get complacent about hiring and don’t settle for anything less thinking that you’re a start-up. There are many excellent professionals who will be willing to invest their careers in your vision if you’re passionate about your business and show them that.

• Start-ups fail due to lack of adaptability

Change is the only thing in this world that is constant. Adaptability of any start-up is the heart of it. Every start-up must possess the guts and the technical knowhow to compete with time. And most importantly, at some point of time it might be necessary that a start-up itself should bring about the change.

• Start-ups fail when the resources are not managed.

Resource optimisation is the brain of any start-up and the government if any entrepreneurship idea. A crunch in funds is the most common problem faced by young entrepreneurs. In order to overcome that chalk out what is important to your business and allocate resources accordingly. If yours is a product company, build a core product offering and get it to customers. If your customers were as excited, they would be even willing to pay at this stage. And bam, you’ve got more bucks to build on further.

• Start-ups fail because of lamentable marketing

Marketing is the face of any start-up idea, In the lecture by Mr Dinesh Dhamija in Cognizance 2013, apart from fantasising about his increased standard of living he emphasised in this particular fact: “Perception is everything. Perception is reality.” There are many avenues that are available for start-up entrepreneurs who market their start-ups other than blowing up cash on simply advertising. Most entrepreneurs just do not know how they can best leverage technology to get more user eyeballs. Harness the power of social media, create and engage with communities, reach out to influencers, start even before your product is launched. Good marketing does not require money, but a lot of time. If you want to reach out to a greater mass, you’ve got to be prepared to invest a good amount of time to reach out to them.

Quoting a Harvard Professor’s views on start-up failure we have a “paradox of entrepreneurial success.” For example: When you’re the creator of a company, you’re increasing the chances that you’re going to get fired. And when you’re a smashing success, you’re also heightening the chances you’re going to get fired. There are some very concrete reasons for that. Often you begin with a technical founder, a scientific founder, someone with deep knowledge who is the best person to lead the charge during the early development of the product. But as soon as they succeed at hitting that milestone, they have to go and build a company. Often they have the exact wrong set of skills for the next stage of development. And one of the big problems is that their success heightens their belief that they’re the right person to keep running the show.

The second factor is that, a lot of times, founders’ early success is enabled by taking rocket fuel, raising money from outside investors. One of the few levers your board has control over is who’s going to be the C.E.O. So every time you raise money, it heightens the chances you’re going to be fired as C.E.O. When you’ve lost control of the board, given up more than half the seats, the combination of that and hitting a new stage in the venture means the chances you’re going to get fired are heightened dramatically.

Nevertheless it can’t be said why exactly start-ups fail. A business is like a palace made out of a deck of cards. A minute change in its organisation may lead to drastic results. At the same time, it should not be a reason to fall back. A prodigious fighter is the one which accepts his defeat and comes back to fight another day. The crux is that the fighter should analyse his mistakes.

“Success is not final, failure is not fatal: it is the courage to continue that counts.”
― Winston Churchill

Written by Abhijeet Gaur (abhijeetgaur16@gmail.com)