Why Startups Fail

Did you know that 90% of the startups actually fail?

In the year 2015, the market research firm CB Insights did an in-depth examination of 135 failed startups. As part of the study, they asked each member involved in the startup about the reasons of its failure. Conclusively, CB Insights finally came up with 20 reasons that possibly led to the failure of the startup. However, factually speaking, these 20 reasons can be categorised in seven broad categories, each of them comprising of a certain intellectual or emotional limitation.

Seven Reasons behind Failure of Startups

1. Inflexibility

"The measure of intelligence is the ability to change."
― Albert Einstein

Inarguably, the biggest benefit that a startup has over any established organization is the very flexibility to be nimble. However, all organizations have a natural tendency to continue to go on with the chosen course of action even if it has been proved unworkable. Inflexibility definitely is the number one reason for the failure of the startup.

Right from the start, plan things with a simple ideology that at some point or the other you’ll have to radically change direction. So, welcome the change when it comes rather than resisting it.

2. Imbalance

You can find several thousands of books and articles about the lack of work or life balance. This imbalance may often lead to stress which can further lead to bad decision making. Most startups these days run in round the clock crunch mode.

Meditate or exercise every day. When you go to bed, turn off your phone. Eat right and sleep right.

3. Sloppiness

"Genius is an infinite capacity for taking pains."
― Thomas Carlyle

There are times when the big companies tend to do a slipshod job. In such a situation, the companies can either float on their brand reputation or simply throw away money at the problem. Entrepreneurs don’t have both these options and hence need to be meticulous and ensure that nothing goes south. Sloppiness can indeed cause the startup to fail through legal challenges, poor product or bad location.

If you want to be the big picture person, you can collaborate with someone who is more detail oriented.

4. Arrogance

"Never believe you are the best, but believe you are one of the best."
― Auliq Ice

There are no two ways about the fact that successful entrepreneurs are always over confident and that is indeed a good thing. Without that overconfidence, no one can really shake off the odds to start their own business. However, you cannot let this overconfidence turn into arrogance. This might happen if you are so certain about the wonderfulness of your own ideas that you stop giving consideration to the market. Arrogance also contributes to the failure of the startup in ways such as not having a proper business model, ignoring the current market need, not timing the products output well or not having the proper network or advisors.

Bring humility in your behaviour and begin to accept criticism without being defensive.

5. Short sightedness

"Failing to plan is planning to fail."
― Alan Lakein

Startups simply cannot afford paralysis by analysis. Logically, you cannot anticipate everything in an undertaking which involves the unknown. So, plan not just for today but for where you want to see yourself 5 or probably 10 years down the lane.

Keep reserves so as to ensure that you do not crash and burn the first time you experience a speed bump.

6. Egotism

"Leave your ego at the door every morning, and just do some truly great work. Few things will make you feel better than a job brilliantly done."
― Robin S. Sharma

To start a startup, you need some energized, talented and experienced employees who have specialized knowledge. However, to successfully run a business you need team effort and it takes no more than one prima-dona for a team to fall south on its collective face. Disharmony on Team/Investors or simply not having the right team can lead to failure of a startup.

Read books such as Team Genius that has several team building rules drafted on the basis of actual scientific research.

7. Hubris

Several entrepreneurs have a common notion that if you build a better mousetrap the world tends to beat a path to your door. This is the engineering hubris which may lead to considering marketing and sales of secondary importance. True if we go back in the history of business, we can find examples of startups that failed due to poorly planned sales efforts or weak marketing techniques but hubris can contribute to failure if you ignore customers, get outcompeted or involve poor marketing.

Pay enough attention in hiring the sales executives and marketers as much as you do in hiring your engineers.

Final Word

Now, that you know about the seven reasons of the failure of start-ups you must ensure that you do not let these things go wrong and work your way through it. Team up with a mentor or look for an advisor in your field that can help you power through these road-blocks! And never forget to ask for help when needed.

Ishan Singh
MD & CEO, RevStart