Failure Teaches Success: What Should Startups Pay Attention to?
What comes to mind when you hear the word “startups”? A team of only 5-10 players sounds like a solid argument, yet the truth is, even a 3-year business can still consider a startup. Silicon Valley is known for its strong venture capitalist community and is a popular destination for startups, but it is also notorious for its high failure rate. According to CB Insights, the no.1 reason for startup failure is misreading market demand (42%). Luckily, we have many examples nowadays to review and learn.
Top Rated Factors
Startups fail for a number of reasons, but understanding the possible pitfalls and how to avoid them can help companies to develop a better marketing strategy and ultimately brings success. Below are some common factors why startups fail. Let's explore together:
Cash Flow (38%)
29% of the startups fail due to running short on funding and imbalanced cash flow. It is common practice that investors will finance startups. The form does not always take a monetary form; for example, it can be a form of managerial/technical expertise. Maintaining a balance cash flow is vital to startup companies.
No Market Need (35%)
A successful company creates a marketplace for its products and services, in other words, a niche market. How to continuously create needs for consumers is a top priority for startups. Does the company have the right team to identify the market need? Can you offer something consumers never thought of but could make their lives easier?
Get Outcompeted (20%)
According to CB Insights, competition is the fourth most common reason why startups fail. The main reason behind this is due to ignoring users during the market research stage. In other words, it is closely related to the previous factor—“no market need”.
Flawed Business Model (19%)
A business model is a vehicle that carries the product and service from the design table into the competitive market. A flawed business model can bring the products into the wrong hand; for instance, B2B vs. B2C or brick-and-mortar stores vs. all e-commerce.
Regulatory/ Legal Challenges (18%)
Some common legal challenges faced by startups: are business structures, taxation, business license, etc. Issues originating from unethical behavior, lack of transparency, and lies of C-level executives can harm a startup company.
Not the Right Team (14%)
Hiring the right talent is critical for startups. Being said, people that are either not engaged with their job or don’t share the same belief are not the types a startup should hire. An excellent CV does not count for everything. You know what they said—“get the right people on the bus.”
Other Factors
Pricing/ cost issues (15%), product mistimed (10%), and poor products (8%) are three other top factors that startups should consider investigating. Other factors such as disharmony among team/investors (7%), failure to pivot (6%), and burned out/lack of passion (5%) are all critical factors to consider, even if they take only a small percentage of the overall factors.
We Can Help
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