Yesterday, I was discussing with one of the founders of a startup. I had a good discussion with him on various verticals of startups like product, technology, culture, business including market strategies. He was quite impressed with my thoughts on startup psychology. He was very curious about my thoughts on why most of the startups fail and asked me this question. I was hardly able to give only 7 reasons to him. But after the call when I started thinking and visualizing, I found at least 20 reasons for failure.
According to me the following are 20 reasons, why most startups fail-
- Wantrepreneur vs Entrepreneur Mindset — It means most of the people in industry run a startup not a mindset of an entrepreneur mindset instead of they run it a wantrepreneur mindset. They don’t focus on entrepreneurship rather they focus on fame and publicity, how to become a unicorn etc.
- Race of Unicorn Club — Most of the startups are running to win the race of unicorn club rather than solving the actual problems of customers.
- Unable to Achieve Speed to Market — This is one of the most important problems of the startups. Either they spend too much time researching, planning, developing a product or confused with their idea or I can say lack of confidence. They couldn’t achieve the opportunity on time and someone else grabbed the opportunity in the meantime.
- Do Not Focus on Profitability — Do not focus on profitability of the company rather than focus on developing new products, only for showcase or attract investors purpose only.
- Lack of Enough Market Research — Most of the startups build their products without enough research, planning and analysis of the market.
- Lack of People Positioning — There is a lack of people positioning in startups. People positioning is a very important part in startups. If skilled people are not aligned properly according to their strength then definitely, it’s not a good signal to the company.
- Fake Transactions — Every startup maintains fake transitions in their system. They properly maintain each and everything in such a way that no one can claim that this is a fake transaction. Only to run the race of the unicorn club. This is one of the biggest failures of startups. They never focus on the actual profitability of the company.
- Do Not Care Customer Satisfaction — This is also a biggest problem of startups. They don’t focus on actual customer problems. If you are not listening to what the customers are saying then you will definitely lose the battle. If you are not solving a customer’s problem then what are you doing? How you can sustain yourself in the market.
- Lack of Agility or Become More Agile — Few startups are stuck with only a single idea for a long time and few of them become so agile that they change their ideas every quarter. Both the scenarios are dangerous and a sign of failure.
- Do Not Follow Product Development Steps — If you are not following the principles of product development then either you will lose or will take too much time to succeed. Suppose, If you built a product without enough research and launched it then there are chances that the idea already exists, someone else is already working the same in the last few years. Now, you have to change your business plan and again you need at least 6 months more to launch it.
- Lack of Employee Engagement Policy — Lack of employee engagement policies is also an important factor of failure. A team of motivated, high energy, highly focused, responsible, having a good attitude and politics free environment is very very much important. Although, If you have a good and unique idea still you will lose the battle if you don’t have a good team of highly skilled people in your team.
- Difference Between Saying and Doing — Although, startup culture is not properly organized and people know about those who work in startups. But there should not be a difference in saying, doing and their commitments. If you are committing something and not fulfilling it, then the team of people get demotivated. Either people start leaving the organization or are not productive and focused at work. Also you can lose good deals for your business too due to this behavior.
- Do Not Believe In Your Team or People — Believe in your people and team is as important as you are believing in your Idea. If you do not believe in your team or people then they will start losing the confidence in your business idea. They start feeling demotivated, frustrated, less productive, not focused and start searching for new options and finally leave the company.
- Believing More In New Employees vs Ignoring Existing — Again this is part of your culture and your mindset. If you think a new employee can do faster and better than your existing team then you are demotivating your existing employees somewhere.
- Investing Money In Parties, Not In Training Programs — Every employee has a unique quality and ability. But he/she could not be good at other things which are really important to the growth of the company. For example all the developers don’t know the importance of marketing things like SEO and affiliate programs. If you arrange a training program for your employees then it would be far better than a party. Because from the party they are only enjoying and from marketing training they will start thinking like a salesperson. By the way, I am not against parties. Although I do not enjoy parties, I am not against it.
- Un-Planned Hiring and Firings — By the way this is also an important factor of startups failure. Startups hire people without proper planning and also fire them without thinking. Are you crazy or Are you kidding? It’s not a joke. Isn’t it? Why did you hire a team 5–6 months ago and after 5 or 6 months what such happens that you decided to fire them. The team is not even settled yet, how can you expect them to get 10x results.
- Working For a Person Not A Company — If any startup’s people work for a person not a company then it’s also a signal of failure. The mindset of people should be that they work for the vision, mission and goals of a company, not for a particular person.
- No Vision, Mission and Goals — If there is no vision, mission and goal of a company and people are not properly aligned with that then it’s a very big problem. Most of the startups are failing because they aren’t clear with that.
- Company Culture — A good and employee friendly culture of a company is very important for the success of a company. If you hire a team of people who are highly talented but not having a good attitude then they will spoil your complete environment.
- Not Listening People, Stick with Your Own Ego — By the way this is also an important factor of failure. If you are thinking that I am the boss and others have to follow my orders. You are not listening to the people and their ideas, feedback and concerns then no one saves your company. By the way, it’s logical that no one could be a master in multiple areas. Apart from some exceptions or extra ordinary people. In such cases you have to have faith in your employees and listen to them because they are masters of their fields. Otherwise ready to fail.
What you think? I think this will help you a lot.
Please mention in comment box.