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These are 10 common reasons why startups fail

Editorial team by Editorial team
August 27, 2019
in News, Scaleups, Startups
These are 10 common reasons why startups fail
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Most startup founders and entrepreneurs think that they are creating the next big revolution in the respective industry. However, in reality, 90% of them fail. The reasons for failure could be many ranging from lack of product-market fit to insufficient capital.

Be it a corporation, startup, investor, academic or economic development person or journalist, everyone will be keen on gaining some insights into the reasons behind the failure of startups. We have curated a list of reasons behind the failure of startups. These can help budding entrepreneurs prevent the chances of failure.

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#1 Lack of market demand

Startups fail when they do not solve an existing market problem. Most companies believe that their invention is quite appealing and there will be a huge demand for their products and solutions. If the product fails to create demand due to low market demand, then the company will face a downfall.

#2 Insufficient funds

Startups need sufficient time and money to operate smoothly. But there is no answer to how much money one needs to spend on the business. Many startups fail due to insufficient funds. Also, many companies fail to raise additional funding.

#3 Disharmony in the team

A diverse team with various skillsets is very critical for the success of a company. Many founders cannot do what is required for a business to turn successful. Both the founder and the team should focus on industries related to their skills and academic background. The skills they possess should be complemented with that of the team. Disharmony in the team might not help the business take off. Sometimes, there can be disharmony among investors of a company might also result in a failure.

#4 Worry about competition

It is common for any business to face a lot of competition from rivals. However, startups should not pay too much attention to the competition. It doesn’t mean that companies should not worry about competition, but it should not be to a great extent. There should be a balance between overconcern and ignorance.

#5 Expensive pricing

The pricing of the product should be appropriate for the success of a startup. If a product is priced too expensive, then the product might fail to bring in customers to make it successful. It can be high only if there is a benefit for the customer and if it makes real sense. In that case, customers do not complain about the product’s pricing.

#6 Ignoring customers’ needs

It is vital for a startup to come up with products and solutions that customers need. Be it intentionally or accidentally, the team should not ignore customers’ needs. Getting feedback from users from time to time across stages of product development and testing does not let a company down. It will in fact get customers hooked on to the next iterations of the products and services.

#7 Lack of a business model

Many times, entrepreneurs believe that it is easy to build a product, service or website and acquire customers. However, it is not too easy to achieve without an effective business model. A business model focuses on figuring out a scalable way to acquire customers and monetize customers.

#8 Poor marketing

For a startup, it is essential to target the right audience. The business should focus on getting the attention of customers and converting them into leads. This is the most important skill of a successful company. If the company or entrepreneur fails to market the product successfully, then the business might not grow as intended.

#9 Lack of passion

Many people come up with great ideas but they do not sustain in the business ecosystem due to lack of passion. The lack of knowledge in the specific domain is the major reason to lose passion in the business. With passion, it is possible to build a product and market it successfully.

#10 Legal challenges

Sometimes, a startup might get strangled with legal complexities and this can be the cause of failure. It could be anything such as the suspension of an affiliate account generating maximum revenue or the inability to launch on a global scale.

Well, these are the top reasons for the failure of startups. Besides these, there are other reasons including failure to pivot, cash burnout, lack of use of the network, no investors on board, etc.

Stock Photos from cybrain/Shutterstock

Stay tuned to Silicon Canals for more updates in the tech startup world.

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