Why does early stage startup fail?

I am associated with early stage startups for more than 2 years now. We are all aware that 90 percent of startups fail. In this article we are going to look at some of main reasons of failures:

1.Not solving a problem:

• Your business should be your passion,do not do a startup just for sake of it. Find a big problem you are solving. Big problem for a founder personally may not be a problem for the community. Market research in target market is best possible solution for this problem. Launch first product as soon as possible for product market fit.

• Too many founders think that their idea is so brilliant that their best course of action is to build the product, show it to the world, and wait for the money to roll in. However, that common delusion is a major startup killer. In reality, people are reluctant to try a startup’s product, because most of them fail. So they will only try the product if it promises to solve a painful problem that nobody is trying to solve.

2.Good idea but luxury for the market:

“Life’s too short to build something nobody wants. “- Ash Maurya*

• There are chances,startup is solving a important problem but its a luxury for community.This leads to hardship in monetization.Generally User spend money on basic needs. Either build a product for mass community fulfilling their basic needs or a luxury product for premium customers.

• Some companies launch products before their time and either the market (demand/need) or the technology is not there yet. Others launch too late, although they might not notice that it would be too late already. The key factor here is to always question yourself with competitors benchmark and with common sense when sales are not taking off.

3.Ran out of Money:

• Founders invest either their savings or family and friend’s money to start their dream project. Normally this money last for 1 year. Funding is solution for cash problem in most cases,revenue is a solution in very rare cases.

• A key job of the CEO is to understand how much cash is left and whether that will carry the company to a milestone that can lead to a successful financing, or to cash flow positive.

• People may always be surprised by the time and number of rejections required before they succeed in raising capital for their startup. Too often this process is started too late and the entrepreneur goes to the rescue with the wrong group of investors – the first ones. Fundraising in a startup environment is something that needs at least 6 months of active prospection, meetings, calls and visits.

4.Talent leaving the job:

• For better opportunities Loyalty is very rare in 21st century,employees normally spend a huge amount of money on their graduation and try to cover this money as soon as possible. So, they leave current job for better opportunities leaving current founder searching for replacement.

• Scared of job unstability Early stage startup can close anytime in the lack of capital,Employee’s awareness keep them distressed about job stability,making them keep searching for other opportunities.

• Cant match up with startup work cultures Startups do not work 9-5 like MNC’s and government offices. Extra effort to show presence in the market and lack of employees due to low initial capital are main reasons. Sacrificing personal life for startup is not everyone’s cup of tea.

• Cant be a Jack of all trades PHP developer can be seen doing business and HR calls in a startup after his working hours. You have to help every deparment in a early stage startup.

• Family pressure to join more secure job Every family wish their child doing a well stable job. Early stage is defition of unstability. 95% startups fail in first 18 months, So families keep on pressurizing their young one to join more secure job.

4.Competition with big MNC’s:

• If you are competing with big fishes in the market, you have to be excellent with your services and on point with your strategies, marigin for error is very small. Capital investor’s hand on your head or good working background are very helpful in growing business despite of high level competition.

5.Distrust in users for new product:

• Why should i leave my current product and use yours? Your product should standout in some way with great marketing to beat already existing product.

6.User unfriendly product:

• According to a survey 17% startups fail in the lack of user friendly product.Most of the time the first product that a startup brings to market won’t meet the market need. In the best cases, it will take a few revisions to get the product/market fit right.

CONCLUSION

“All I Want To Know Is Where I’m Going To Die So I’ll Never Go There. “-Charlie Munger

These were some of potential reasons of startup failures.

Follow a systematic process of planning,committing,tracking results,raising necessary capital to run the company and last not the least keep hustling for your dreams.

Thank You