Last updated on January 24th, 2023
Update: This article was last updated on 19th May 2020 to reflect the accuracy and up-to-date information on the page.
Time is changing for startups. Things seem to be getting easier for them. Several support practices, like – funding groups, incubators, accelerators, etc. are available for the startups to fine-tune their journey towards success. Even with all those comforts, the numbers do not claim that startups are making merry.
Reports by Statistic Brain claim that almost 8 out every 10 startups fail within the first 18 months of its launch, while 1 more fail later on. That makes the overall failure rate to 90%.
So, what do they have in common that the other 10% manage to stay away from? Why do most startups fail?
Vulnerable startup ideas and disoriented team goals are some of the fundamental reasons that cause startup failure. But the list does not end here. A deeper analysis shows that several other causes can weaken the potential of businesses.
In this infographic, we list the top 6 reasons concerned with funding, partnership, marketing, etc. that can be the reason for a startup’s downfall.
Let’s see these points in detail-
1. Inability to Raise Fund
The inability to raise funds is one of the biggest concerns ignored by entrepreneurs. Many will be shocked once they know the actual number of rejections faced before succeeding in raising capital for a startup.
Generally, this process is started very late, and ultimately the entrepreneurs land up with the wrong group of investors. Fundraising requires at least six months of dedicated work involving meetings, calls, and visits. The more regular entrepreneurs are in fundraising, the more they will realize what their startups need and what investors expect in return.
2. Ignoring Customers
Ignoring customers can prove to be the costliest mistake for startups. Knowing what customer needs and being sure that startup is offering the same products and services to the customers can help to make it successful.
After the customer purchases a product or service, it is worthwhile for the company to take feedback. This feedback can be in the form of compliment, complaint, and query from the customer. In the initial stages, feedback helps to improve the product and services. However, in the long run, responding to customer’s feedback helps engage the customer and make them feel valued.
3. Not Having A Co-Founder
Starting a business is no walk in the park. However, it becomes even more challenging when there is no one for support.
A co-founder can provide moral support, help in making better decisions, divide the load of responsibilities, fill in the skill gaps, and can give a broader perspective of the business. So, it is very important to choose the right co-founder for the startup. Entrepreneurs should look out for someone they can trust and who has complementary skills.
4. Hiring A Team with No Competence
A startup can never succeed without a great team working behind the scenes as they are the people who understand and execute the founder’s business idea. So, the decision-makers need to hire the right employees, which will make a good team.
To make a good team for the startup, management should not only look for employees having skills required for the job but also have interpersonal skills to gel with the team and increase morale. Additionally, the entrepreneur should also take initiatives to improve the bonding between the team members.
5. Not Realizing Competition
Ignoring the competition in the market and not realizing what the competitors are capable of can be one of the top reasons for startup failure. Keeping a fleeting eye on competitors can help an entrepreneur to take proactive business decisions before competitors do, learn from their mistakes, and plan the next steps.
6. Failure to Market
No matter how great the product or service is, it will not succeed in the market till the time it reaches the audience. Poor marketing is one of the reasons behind the failure of the startup.
A common problem with the entrepreneur is that they rush into newspaper ads, web ads, glossy brochures, and radio commercials to market their product or service. Instead, the first two things they should consider are the budget and how many potential customers that advertisement will reach.
Opting for the marketing strategy that will target the most filtered audience with the least budget can be very profitable for the business.
The competition in the business arena is soaring high, and things change rapidly with the business. Once the startup begins, declining entrepreneurs are left with very limited chances to save it. Entrepreneurs must keep the immunity guard on with the startup all the time right from the beginning.
So, they should make sure to develop a business strategy to counter the reasons mentioned in the infographic and lead the startup to better results and achievements.
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