The Truth About Why Most Startups Fail
Startups can be a very rewarding venture for those willing to take risks, but these risks can be pretty serious ones. I, as an entrepreneur with a few good years of experience in my résumé, have encountered this first-hand, and it is certainly not just a rumor to scare away bright-eyed future entrepreneurs.
An alarming percent of startups fail as quickly as they begin in the modern day and age. Understanding why this phenomenon occurs can help you avoid making the same mistakes many people find themselves falling into time and time again. Let’s take a look at some factors I consider key in the contribution to the ‘fast-crash’ process.
Smaller Startups Fail to Even Get Their Foot in the Door
There are many reasons why most startups fail. However, one culprit seems to be the main cause, and this is, not surprisingly, a simple lack of cash.. Huge conglomerates have no problem throwing an endless amount of money at an obstacle until it disappears or becomes irrelevant, but this just isn’t possible for most small startups.
There is a myriad of reasons why this takes place, and there are several different ways this can go.
Usually, the most common avenue where lack of money tends to become a problem for startups is through the simple depletion of resources. Having a limited amount of cash can only take you so far, and if your startup isn’t fortunate enough to succeed by then, you’re going to be in trouble.
Don’t just take my opinion on this. A study conducted by entrepreneur.com discovered that 82% of all startups fail due to issues with cash flow — something which well and truly puts things into perspective.
Markets Are Rife with Competition, and This Is Terrible News for Newcomers
We have all heard it; competitive markets are always a good thing. Or are they? While this may be true for the consumer, it is certainly not the case for those of us who are a little more business-minded. Take this; the same study referenced in the previous section also cited a lack of market interest as the second most common reason why startups fail, coming in at 42%.
Even if a startup has an incredibly innovative idea and has the funds to back it up, there is no guarantee that it will become a success despite popular belief. This often leaves open-minded future business owners with a sour taste in their mouths once things don’t go as smoothly as they’d expect, as this only decreases the chances of success even further.
Startups are A Lot More Intricate Than Most People Think
Picture this; you’ve just come up with an incredible business idea and have the necessary funds to realize your dream. However, after a short while, a wide range of issues begin to pop up that you had never even factored into the equation, and after a lengthy battle of trying to stay afloat, you eventually come to your demise.
This is exactly what happens to most new startups. Whether it be a lack of talent, bad management, indecisiveness, a failure to reduce expenses, or a plethora of other potential factors; there are just so many aspects that can go wrong, ultimately taking the wind from the young and aspiring entrepreneur’s sails.
All of the mistakes mentioned above hit right at home.. The usual warning signs of a failing startup are as clear as day, and like-minded investors like myself are all too familiar with the impeding downfall of a promising startup.
It’s not just me; Ranjay Gulati, professor of business administration at Harvard Business School, also noted many of the issues I mentioned as the main issues most people face when attempting to realise a startup. This is why it is so important to have a clear vision before even thinking about launching any new business, and the more potential issues that are accounted for, the better.
Before you throw away your dreams of launching your very own startup, there is a silver lining. Even though there is a seemingly inexhaustible list of factors that can go wrong when trying to realise a new business venture, there are also solutions to combat each and every hiccup you can imagine.
Knowledge is power. Just by being aware of the factors that cause most startups to fail, you have an advantage over all the competition. It is true; there are a ton of things that are just simply out of your control.
However, there are several aspects you can control too. Whether it be discipline, determination, courage, or even willingness to learn; if you truly put your mind to something and refuse to take no as an answer, the world is your oyster.