Why do startups fail?

We always talk about how startups need to succeed and the various factors that can influence or trigger the success. But as we also know the fact that not every startup is a success. At times due to various reasons the startup fails to click in the market. Let us look at some of the common reasons that prevent from the startups in becoming successful.

  1. Market:

The first thing that you have to be sure of is the existence of a market for your product. It might happen that there is very little or hardly any buyers. This will result in failure. Though you might feel that you are addressing to a particular section of the market and that your product is an answer to several customer problems, ideally in practicality the scenario might not be the same. Understanding the need for your product from a customer’s viewpoint is essential. It might also happen that the market timing is wrong. You could be ahead of your market by a few years, and they are not ready for your particular solution at this stage.

  1. Lack of business/revenue model:

The absence of a business model only means that there is no realistic approach and lack of clarity. With a business model you can be clear of 2 important things: scalability and monetisation. Even having a clear revenue stream is crucial as getting out of cash is not a good sign for long-term sustainability. The valuations of a startup don’t change in a linear fashion over time. Simply because it was twelve months since you raised your Series A round, does not mean that you are now worth more money. To reach an increase in valuation, a company must achieve certain key milestones.

  1. Bad management:

Management is the key for any startup. Whether it is people or finances, everything needs to be managed rightly. Giving the startup the right direction and steering it when needed is what must be done aptly. Startups require talented, experienced and energized employees who have specialized knowledge. Another reason that counts here is the work-life imbalance which is high in startups. This results in lack of focus and a quick burnout which keeps good employees away from contributing their skills to the startups in need.

  1. Products:

Are you creating the right kind of product that is needed by the customer? Matching the customer expectations is key. If your product is obsolete or if it is too futuristic, it won’t sell. Plain and simple to understand. This eventually results in the failure of the startup.

There are several other contributing factors that lead to startup failures including high cost of customer acquisition, no funding, overestimated machine learning and underestimated efforts in converting a prototype to fully functional hardware product and alike. Startups have to understand these and create a realistic product with the right team and financing that will keep them afloat.

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