Do you know reasons why your start up will fail? Well! There are many reasons for it. In this article we have discussed some of the prime reasons why a start up fails.
The article is very specific and objective. Every point tells you why a start up fails.
I have not included those points which are not objective and to the point. Therefore, either you are venture capitalist or a founder of a start up, you should read the points given below.
It might help you to correct your course. So here are some of the reasons.
1. Very Unpractical and Obsolete Niche Idea
The first reason why a start up fails is an obsolete idea. If you are building up a company on an idea that is being used and there is nothing new to it then you are bound to fail.
Most of the startup fails because founders have nothing new to come up with. Hence, the idea must be very practical so that you can implement it on ground.
Never invest money on a start up if you find the business idea is not innovative.
2. Poor Research About Markets
Startups fail to catapult because their research work is very poor. You cannot start a company without knowing things going around in the markets.
You have to find out about your competitors and customers. You have to dig deep to find out what your customers are asking for. Lack of research about your competitors and their business models could take your startup down.
There must be a team with efficient members who have deep understanding about the markets and niche you are operating in.
Without thorough research a start up fails.
3. Who is the Founder?
If you are a venture capitalist then you need to know about the founder of the company. Usually if there is more than one founder then success rate of the startup is higher compared to one founder.
Have you ever noticed most successful companies like Microsoft, Oracle, IBM, HP all of them have two founders.
So invest in a startup that has two founders because success rate is much higher.
However, on the flipside more than one founder means there could be infighting among the founders.
Founder or founders could be a reason why your startup might fail.
4. Unprofessional Team Members
I have seen startup failing because the team members are unprofessional and not at all skilled.
People who start a new company tend to employ cheap labor because they want to save money.
Hence, if you compromise on the skill set of your team members and employees then your start up is bound to fail.
Most of the startup fail because their team members are very inexperienced and cannot do the job. So do not save money at the cost of professional team members.
5. Lack of Funding and Mentorship
In previous point I mentioned about team members. Your startup might fail because your team members are not competent enough.
If you want to hire experienced employees then you have to pay them a good salary. So for paying salary you need proper funding so that you don’t compromise on skilled labors.
But many of startup fails because the funding that they receive is not enough to pay their employees and conduct a detail research.
Moreover, lack of mentorship could also lead to a failure. You have to have someone who can guide and show light to new startup.
6. Failure to Create a Revenue Model
Although it is very difficult for a new startup to have a revenue model but at least you could have a roadmap for the coming days.
If there is no revenue model then investors might not be interested in your startup. Hence you have to convince him or her that down the road your startup is going to generate enough revenue.
Many startup fails because they do not realize the importance of developing a revenue model beforehand even when you are not generating any money.
You have to have something to show to your investors that in coming days your startup could be a great success. Hence, a revenue model is important.
7. Poor Management of Investors
Managing your investors could be a headache. But you have to do it otherwise your startup might fail.
You have to keep in touch with your investors all the time. Engaging with them is very important because you simply cannot afford to lose them as they are the one who are going to fund your startup.
I advise you not to let your investors take over your company because this could very much happen. Many investors think that they are funding you so they have right to control your company as well.
Hence, you have to be extra careful and smart enough that they keep funding and at the same time you manage the company and not them.
8. Lack of Leadership Quality
If the founders of a startup cannot lead and inspire the team members then the project might fail. Your founders have to be leaders also.
There is a difference between operating a fortune 500 companies and a start up. In a Fortune 500 company you have a well established team and don’t have to worry about funding, raising money and developing a revenue model.
In a startup you got to inspire your team because you don’ know the company might fail. However, a Fortune 500 company is well established and team members are very experienced.
Moreover, you should always be there on ground to help your team. If you are not being able to lead then your startup could fail.
9. No Planning for ROI
An investor or a venture capitalist invests some money in a hope that he or she will get at least 10 times money in return.
So if you are running a startup then you have to convince the venture capitalists and other investors that they will be getting 10 times in returns the money they invested.
If investors don’t see profits then he might decline to invest in your company.
You have to plan and lay out a strategy how you are going to convince your investors otherwise they are not going to invest any money and your startup might fail.
10. Time and Style of Launching the Start Up
Time and style of launching a start up could play an important role in the success and failure of the new venture. If you are launching your start up too early then it could fail your business.
Research has shown that if a start up is launched too early then it is bound to fail. You need to take care of every small detail like from software programs to hardware.
Moreover style of launching a start up is very important. Do you want to launch very slow or very fast?
Slowness in launching could be fatal it can ruin your new venture.
So time and style of launching a start up plays an important role.
11. Going with Wrong Platform
This is particularly for an IT start up. If you choose a wrong platform for developing an application then it might cost your start up. Whether you use Windows platform or any other you have to be sure and
allocate all your resources according to that.
You also need to hire programmers with right skill set and trained for a particular platform. But most of the startup fails because they mess up with their codes and develop faulty applications.
So you have to choose a right platform.
12. Not in Touch with the Reality or Ground Situation
Finally the last and most important reason why a start up fails is staying out of touch from ground realities.
If you are a venture capitalist then you need to know what is going on. You must talk to team members on daily basis.
You have to know every single detail how your money is being spent. Leadership quality could play an important role here.
Most of the startup fails because investors do not pay any attention to the startup they invested in.
So these were some of the reasons why a startup could fail. If you are investing money on a startup then you must read these points and try your best avoiding a failure.
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