Why Most of Startup Companies Fail?
What comes on your mind when you hear “startup company”? Cool? Challenging? Venture? Hard-working? A startup is a company typically in the early stages of its development. These entrepreneurial ventures are typically started by 1–3 founders who focus on capitalizing upon a perceived market demand by developing a viable product, service, or platform.
“Startups looking for angel investors or venture capital (VC) absolutely need an exit strategy because investors require it. The exit is what gives them a return.” — Tim Berry
Many of you perhaps know some startups fail 2–3 years later. Maintaining a startup company won’t be as easy as an ABC. There are a lot of things to do and face such as marketing strategy, developing products, and finding a venture. So, are there reasons why most of the startup companies fail? What are the main reasons for its failure? Let’s have a look at these points.
- 38% of the company ran out of cash
- 35% of the product is not what market need
- 20% of the company gets out-competed
- 19% of the company have a Flawed business model
- 18% of companies face regulatory/legal challenges
- 15% of companies have pricing/cost issues
- 14% of the company hires the wrong team
Moreover, the factors of startup company failure come from its internal organization. It starts with the leader’s lack of focus. She or he may have a thousand ideas and desire to develop the product or service. On the other hand, it can be a boomerang for the company. The leader needs to focus on one product or service and then try to develop and improve it based on market demand and customer feedback.
Another factor for startup failure is financial or operational strategy. As an owner, you will be more focused on how to produce your excellent product. But you need to evaluate your financial and operations equipment to support your work. Although you have a lot of funding, you have to save at least 10% from it. It can be used as an emergency saving fund.
A strong leadership core is essential when you’re trying to build a small business, but choosing the right people is often challenging. Approximately 7% of failed ventures cite issues among the support team as a barrier to success. Hence, when you treat your team badly, your company is going to die.
So, after you read this article, what is your strategy or any idea to have your own startup company? or just a small business?