Three reasons start up fails

Anuma Maxwell -

 Three reasons start up fails

By Anuma Maxwell

INTRODUCTION

Being a startup founder myself and with prior experience of building a startup from scratch and sharing both successful moments and moments of failure, one great learning has been that we can’t pin point any specific reason for the startup failures. There can be million reasons which can lead to a startup not being able to pull it off and eventually having to shut the shop down, pivot to a different business model, or restructure the entire startup business.


CLARIFICATION OF TERMS

First, what is a start up? One of the most practical and relevant definitions of startup has been given by Eric Ries . He said: "A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty."


So one thing is certain: a startup is formed with a very specific goal in mind.They not only have to define the problem statement but also need the financial support to experiment with their business model and reach the right market-fit stage. Till then, it’s all a test of the founders' and team members' character and coordination with each other. How the entire team aligns with a startup’s vision plays the pivotal role in sustaining the bad phase, which is utmost unavoidable.


What stats say about startup failure :

As per smallbiztrends.com some of the stats related to small startup failures in 2011 are

1. 4 percent made it to the second year

2. 3 percent made it to the third year

3. 9 percent made it to the fourth year

4. 3 percent made it to the fifth year



Top 3 Reasons for Startup Failures :

1. Product Market Fit : The products or solutions they built were not what the market needed in that phase of market context. To be more precise, startups built solutions that did not solve the problems relevant to the existing market. Their ideas or solutions were not competent.


2. Lack of finance: This is always a problem most startups encounter. They start without having a clear-cut financial bandwidth to start with and also lack the financial backup to sustain the phase where they are building the product and testing it to make it market-fit.


3. Competition: After running the business for the first 12 months and finding a sustainable revenue model, they struggled to compete with their peer competitors who entered into the same market with more preparation or with more financial power to outcompete them. Due to ignorance and lack of pro-active measures to outcompete their peers, lack of competitive and market analysis in being future proof led to their demise.


CONCLUSION

There is no denying the fact that the success ratio for any startup or small business is 1 out of 10. There will always be an option to pivot and try a new way of doing business. Failures are inevitable, but that experience will play a vital role in shaping you as an individual and will prepare you for much bigger risks and even bigger rewards.



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