7 Reasons startups fail and how to avoid them

Startups are made out of ambitious entrepreneurs and creative people coming together to create a product of high quality and extreme profitability. However, countless startups are shattered while only a fraction succeeds, and a fraction of those grows into a ridiculously profitable endeavor.

Developing an air-tight business plan is essential in preventing any random elements within a market. However, markets are living entities made out of people interacting within them. You won’t be able to avoid every hurdle by preparing your long journey to success, but with a good game plan and some nimble navigation – risks will be minimized.

You might also love to read The Biggest challenges of the first year in business. However, for now, I will list seven reasons why startups fail and how they can prevent it:

1. Failure to raise funds

If your dealmakers are still green within the space, don’t be surprised by the amount of doors you’ll knock on before one opens. Venture capital is presented via media as some sort of a golden goose -which cannot be further from the truth. The reason such people have so much capital is exactly that they were meticulous in their decisions who will they fund.

Be direct, convincing and professional. Remember that your potential investor is only interested in the bottom line. He isn’t emotionally invested in your project, he doesn’t care about the tiny details of your development process. The only thing that matters is time, money and return rates. So keep that in mind when raising capital.

2. Ignoring competition

Having a self-centered approach will blind sight you. By observing your competition and monitoring what they bring to the table, you get the necessary perspective to see what your product is lacking and how it will fare against those who also want a piece of that market pie.

By remaining ignorant to this fact, you risk burning down everything invested, thus leaving the table with no chips and a sad face. The point is – be proactive and always keep testing the waters, in the long run it can only be beneficial.

3. Insufficient connections

Reaching the right people can be difficult for some, but isn’t actually that hard to do. You would be surprised by how much people you can already reach. Ask around the office if someone knows a relevant person within the industry. It doesn’t really matter in what capacity that person is.

Utilizing people within all the market cogs (economics, law, media, etc.) is useful since your own business is impacted by all those aforementioned spheres. Still, if you’re out of options, partnering with SEO or PR agencies isn’t a bad idea since they can handle the reach and exposure for your product, while you focus on making it.

4. Fighting with the bulls

Some markets are simply dominated by certain companies. Having an idea for an internet browser that is even better than Google is awesome, but if you can deliver that kind of a product, chances are Google will likely buy you out rather than let you risk their current position. Keep in mind the financial and influential power of your (potential) competition.

 Not every market is accessible or even realistic to conquer. For example, even giants like Uber couldn’t outcompete its Chinese counterpart Didi and simply left the Chinese market. Choosing your battles wisely is the key to success.

5. Legal hurdles

Registering a brand, entering new markets, managing the legalities of cash flow and other business related activities requires legal assistance. Having clear paperwork is the best ailment from potential government inspections. Don’t enter the most common pitfall, get some legal aid.

For example, companies like Withstand Lawyers offer services for such startups by providing the legal framework necessary to keep your business legal and sound for all parties involved, which is of pivotal importance.

6. Failing to prototype often

Developing your product secretly has its benefits when it comes down to hiding your secret formula. However, being overconfident and convinced you have the perfect supply for the market’s demand is a slippery slope, at best.

By being afraid someone will steal your idea or presenting an inadequate version for testing, creates a bubble of opinions that can be quite unhealthy for the end result of your product. Constantly have a testing loop for your prototype, the product has to evolve in accordance to the user feedback. It doesn’t

matter if the result isn’t what you’ve originally thought of. The only thing that matters is that the consumers want it, and they have to want it bad.

7. Biting more than you can chew

Lastly, let’s talk about success. If you start making a profit, don’t become overzealous. There are countless variables on why and how you are in your current position. Remember, slow and steady wins the race. Pouring more money into the product isn’t necessarily the end all be all solution.

Analyze your market, quantify the price-per-user and see what works for your business in the most stable way possible. This doesn’t mean you shouldn’t invest big bucks once you get rolling, but rather that you should always be weighing your options and finding the right pace for everyone involved in your product.

The situations I’ve presented are just a fraction of potential problems. Being afraid isn’t a bad thing, being ignorant is. Try finding all the potential leaks in your business structure and work with your stakeholders on how you can fix them. Open your mind to criticism and suggestions, even you can become that fraction of a fraction if you play your cards right.

About Author :

Cate Palmer is a designer, marketer, and writer. Cate’s expertise could be summed up in web design, digital marketing, and business-related topics. Cate’s interests are, on the other hand, wide and ever-evolving.


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