The truth can be scary, but it's out in the open. Many startups crumble even before raising their second round of funding.
Every year, scores of new businesses come up with innovative and out-of-the-box ideas, creative inspirations, and a head full of dreams to fulfill. Unfortunately, only some reach a stage where they can emerge from their cocoon into the commercial world. A study by the U.S. Small Business Administration in March 2021 revealed that only 80% of the startups were still standing after their first year. Other studies suggest that about 90% of startups fail for many reasons, primarily due to a lack of funding.
The grim fact is that the numbers don't lie, and it's time you act upon it if you plan to create a new organization together. So, why do startups fail to take off?
One of the primary reasons startups go downhill is the need for more funding. It's not just the lack of investors alone, but reasons like heavy investments, lack of proper financial planning, or long-term goals regarding finances that score highly on statistics.
Organizations often need to spread their investments more evenly to avoid any tight spots at a later stage.
There are many ways to reduce the initial investments, such as:
A. Working remotely to save back on office spaces (at least for the first few months)
B. Hiring tech talents or teams temporarily
C. Limiting employee numbers to the bare minimum till you land a definite project
D. Go with organic marketing tools to keep a check on marketing expenses
E. Keep a check on legal costs, permits, and technology expenses
You cannot run organizations single handedly. You need a competent team with similar goals, targets, and dreams for the company as you do. Despite all this, you need experts who can deliver, braving all odds.
Yes, you may need to invest in hiring a good team, but some investments can give good returns, and they are mandatory ones that drive startups to succeed in the market. Putting together an excellent team to fight market battles is a wise way to survive the market crisis.
Inefficient research or failed business models can cause steep damage to the well-being of the company.
As a startup, your one major credit is the uniqueness of your product and its essentiality to the targeted audience. The first market research you do to see if your product will sell and how strong your competitors are can make or break your business.
There are many famous examples of companies that went out of business because they needed to change their business models or products. Blackberry phones, for example, were the first smartphones to grab attention, well before the coveted Apple iPhones. There were many problems here—a need for more consumer insight and a failure to adapt to changing technology, among the most noted ones.
Blackberry was a more prominent organization that went downhill due to a business model taking a wrong turn. But many startups have failed because they needed strong growth plans to beat the competition in a market that changes all the time.
When you know, there are innumerable odds against achieving what you set out to do with your goals; it is necessary to take a step back and reflect. It would help if you researched the case studies where the companies have failed to leverage your organization against such a steep fall.
An extensive plan goes into your tech startup, from research and funding to build a great team. However, more than just reflecting on ways to succeed is required. The best results come from deciding what to do if something goes wrong and what to do if something unexpected happens.
If you want your new group to succeed no matter what, you must make sure it is ready for anything. There are no definite ways to succeed—yes, strategies and relentless efforts help, but tech startups can still fail.
The best way to ensure you don't fall into the same pit as the other failing companies is to create a protective covering before you face the music.
Are you all set to take on the challenge? Tell us some of the tricks and tips you use to keep your business from failing.
