Top reasons why startups fail [2021 Complete Guide]
By: Sahal S
Tags: Startup, Business Strategy, Entrepeneurship, Business, Startup Lessons

Startups are what become multi giant corporations once they take off! But did you know? 9 out of 10 Startups fail! Startup businesses are the future they say! But not all startups make it through their initial phase, and there are many reasons for this! It’s sad that most of the stories we read in Forbes magazine are just 10% of the whole story. In this article we are exclusives talking about the rest 90%, on what really matters to rising entrepreneurs like us!

What causes startups to fail?

More often than not it’s never the fault of the founders or the team. And yeah, most of the time it is, it’s the small mistakes during the early phase of the company that causes this. The domino effect due to the result makes the business go bankrupt!

Why startups fail according to their founders?

The most important part of the whole topic according to us, and might simply be the best case study on this controversial topic. Here we have curated some of the most common reasons why most startups have failed. This is from a founder’s POV(Point of view), so most of what is said here can be the answer to decrypting how startups end up in their worst nightmare!

Building something that has no market demand

Proper market research is crucial when creating a startup, making sure what the startup has to offer is something that solves a problem/need in the society.

Research shows that the primary reason for start-ups to fail according to their founders is due to the fact that they build a product nobody needs or nobody asked for.

Bad Hiring Practices or hiring the wrong people

For that fact, lot of them, we mean lot of start-ups have to put a lot of money into marketing and research into something that nobody wants and thus, the the down fall due to bankruptcy.

But this is only one of the reason for it, other reasons include poor hiring practices which results in the formation of the wrong team. For a business that is still in the infant stage, this can really hit hard on the survival of the startup.

Failing in marketing or not doing it at all

And it doesn’t end there with bad hiring practices, bad marketing decisions and research is another cause for the downfall of many startups. As a consequence of this, many startups get out competed by those who do it right!

And when thinking marketing, many startups keep short-term goals in priority over long term survival and goals, or let’s just say not keeping up to the original mission and vision. This is one reason that is often overlooked. Most founders just hope the right customers will find them without even building trust and value which is the fundamental of branding. So yeah, Branding and marketing is key!

Speaking of which, we have some amazing solutions to help businesses grow!

Lack of focus

Most people start a business due to their love for what they do and “passion”. This is often what drives the most successful businessmen to do what they do, to do what others don’t. But often, the enthusiasm fades, or the initial struggle throws many young and even entrepreneurs out of shape. Making them have a second thought on the whole mission and vision.

With that said getting distracted from the original mission or not contributing enough to the idea until the tree bears it’s fruit is another reason why most startups go bankrupt.

Not asking for help!

Startups are never self sufficient like their bigger corporate cousins which often has the ability to attain the goals using in house resources or by out-sourcing to other firms. And most startups won’t be able to do the same without reaching out for help!

Most startups maybe have great ability in doing what their niche needs. But they may suck at other things where they need to be good at as a company. Such as — digital marketing, social media game, making amazing videos and animations of how they do it, or even making sure they get the right leads and reach the right audience, and they necessarily don’t have to be, instead they can ask for help from an agency that is often ready to help with amazing packages.

Failing in the Social Media game!

Social is something no business owner should avoid, at least not in this age. Come on, it’s free real estate to reach your right audience, come to think of it, most people who follow/like your pages are people who like what you post about the product/service you offer! And these people will obviously be the people who will become your potential clients.

With such a huge potential, it is crazy to think that many startups fail because they failed to play the social media game right!

Focusing on investors over customers

Most startups don’t get this part, it’s about the customers than the people who will assist you with the journey of reaching the customers and delivering it! And when the founder give more focus on the investors than their clients/customers.

Practicing this will cause you to take attention away from the customer which can cause bad user experience or poor customer satisfaction which can in turn result in the businesses’ shutdown!

Not enough funding/capital

Let’s put it like this, the day the start up runs out of money, it’s dead, DEAD! And the whole mission in the initial stages for the startup would be to not end up in that ditch. A good service/product and marketing would be necessary to pull this off.

We suggest startups to focus more on getting and retaining customers using creative strategies to stay in the game and rise from the startup phase.

When do startups usually fail?

Out of the 90% startups that failed, as per studies conducted 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.

It’s crazy if we come to think of it that startups fail 5–10 years into their making, which is why proper market research and analytics is very important for the longevity for startups.

How many startups fail in their first year?

Almost 21.5 of startups fail in the first year as per research conducted by the Small Business Administration (SBA).

Why do most tech startups fail?

Tech startups are often that boom as soon as they are launched if done right and if done wrong those that fail rapidly too.

Here some of the reasons why many tech startups fail in 2020–2021

Poor market comparability

Building a product/service that people don’t need is often why even most tech startups are prone to fail. Which is why analyzing the market posture and feasibility is very crucial.

Running out of Bucket money

Not having enough investment to grow the startup is another reason most tech startups fail as unlike traditional business models, a lot of money needs to be put into R&D and marketing to retain a reliable customer base.

Wrong team to work with

Often than not, not having the right team or passion driven people in the startup can also lead to their collapse as startups are more volatile compared to established corporations. Which is a reason to consider hiring seriously when building and growing a startup.

Due to competition

Strong competition from established businesses or other startups working strategically can also lead to ultimate fall of many startups. To overcome this, startups should focus aggressively on marketing and branding in their early stages and build a working strategy to compete in their respective niche.

Scaling without a proper strategy or plan

When a startup goes into the scaling phase, it is very vital to do proper market research and analyze feasibility before scaling either by replicating competitors or following what works elsewhere.

How many tech startups fail?

In the 90% of the startups that fail, we can confidently say that almost majority of them are tech startups that start with a vision but fail to capture market.

How many startups fail in India?

90% of the startups fail in India as per 2020, there is no specific research done India alone, so far as per our research, but it is safe to assume that the international analytics can work for India too.

Why do they fail in India?

Most often Startups fail due to a weak management that fail to understand the market as well as bring in innovation to the market space, instead of copying their completion and also due to all the reasons we mentioned in this article.

Another reason that is not talked about much is lack of proper aid for startups from the government’s side. For a country with such potential, it’s sad that many entrepreneurs are let down by how the government overlooks the need to help startups in it’s times of crisis.

With that, hope the article helped you guys, if it did, share it with your circle and stay subscribed for more!