India has the third-largest ecosystem for the start-ups, yet 80% to 90% of Indian startups fail within the initial 5 years of their inception. Do you know why startups fail? We have found some of the important reasons behind a start-up failure.
Here are a few reasons why the startups fail and the steps that you can take to avoid the failure:
Lack of innovation- As per a survey, about 77% of the venture capitalists believe that Indian startups lack innovation or special business models. A study by the IBM Institute for Business Value found that nearly 91% of the start up’s fail within the initial years. One of the common reasons behind this is the lack of innovation. Though India has the third-largest startup ecosystem, it does not have meta-level start up’s like some of the popular names like Facebook, Twitter, and Google. Indian startups are also popular for duplicating global start-ups, instead of creating their own business models. Some of the innovative Indian startups in India include Ola, ChaiPoint, Swiggy, and Saathi.
How to avoid?
Innovation in business assists in various ways that include stand out from others, beat the competition, helps solve issues easily and increases productivity. Here are some vital points that start-ups should consider:
- Avoid emulating the present successful global startup ideas in India without research and a complete understanding of the Indian market. Start-ups require professional innovation and technical talent.
- Think about the long-term fuel of the idea before getting into ideas that are trending
- Find the correct resources for starting the start-up with innovation
Lack of funds- It was reported that in 2018, Tazzo, a bike rental shop was shut down. The reason, as informed by one of the founding partners of the company, was not fit for the market which ultimately led to the drying up of money. Though the start-up had raised a considerable amount of money, the lack of a profitable business model resulted in the shutting down of the start-up. There are millions of ideas floating around in the market. But turning those ideas into reality needs money. Those that do procure funding require scalable and profitable models to grow the startup. Lack of money of one of the vital reasons behind the failure of start-ups.
Insufficient money is a roadblock that leads several startups to close. For those companies that receive seed funding, the inability to raise follow-on money is one of the significant reasons behind a startup failure.
Key factors to consider
- Start-ups must have efficient revenue and business models
- Start-ups must pay attention to revenue and profit as much as to their products and services from the initial stage
- Money must be spent judiciously
Lacking focus- When Warren Buffet and Bill Gates were asked about a factor that led them to be successful. Both gave the same reply, i.e. focus. Let us see how start-ups can maintain focus. As a start-up, one should consider both good and bad feedback. You must decide what are things that need focus and at a time focus on one thing.
Addressing the challenges and drawbacks of your startup will help it to grow.