What are the top reasons that startups fail?
Most startups fail obviously because of under-capitalization. Finance withstanding, what other reasons reasons do you believe that startups fail?
Along the same lines as undercapitalization.
Don't understand the "Numbers" and how they relate to the business activity.
Have failed to vet the viability of the product in the marketplace. (Just because it is a good idea does not mean someone will pay you for it!)
Having the wrong people/plan.
Failing to adapt to changing circumstances or changes in understanding of circumstances. Alternatively adapting too quickly to perceived changes.
I'm sure there are more, but those are the initial ones that come to mind.
Top (for me)
1. No consideration for the market (bad idea) - when you are doing a product for products sake. i.e. building a restaurant app without checking it with actual restaurant before and during your development can have devastating results. Consider an app that allows you to download the app from app store in order to be able order at a restaurant while sitting in the restaurant (dining-in). There are couple of solutions like that in the open.
2. no work on sales/marketing - startups fail to organize and work the sales / marketing part, taking care of the basic product only. Sales and marketing strategies are done while product is built.
3. loosing focus - startups tend to loose focus while creating the initial product, not following the strict definition they set up on the start; new ideas come up during development and project grows in size, becoming more expensive and delaying launch. This threat mostly comes from "top level management" with "ideas" that pop up every day, depending on their mood, current weater, local tv programme or the dinner talk they had last evening (you pick).
As Adam said, under-capitalisation is something that actually might not be the reason at all, depending on the industry you are competing in.
I think it depends heavily on what type of industry it is. For example, Web Design doesn't have a huge start up cost but if you don't have consistent deals in the door, you cant thrive. Same for a restaurant.
If you sell a product, not having enough inventory, a big R&D budget, or a large volume of sales could all be valid reasons.
What type of start up are you referring to? I think once we know that, the community will be better suited to answer
Other reasons that start-ups fail, in my opinion would be no consistent corporate culture. employees in positions that they may not be suited for, working in an environment where the stakeholder(s) cannot mentally adjust to delegating, too much micro-management are a few that come to mind.
I think the top reason why startups fail because they don't know their target market and also they are not able to know who really is their market and what the market need.
Motivation, lack of relevant skills (i.e. trying to do everything yourself), ignorance, lack of adequate research, lack of dedication.
1) Not having a value proposition that makes them stand out from their competition.
2) Poor communications and treatment of clients
3) Over promising and under delivering
4) Not pivoting the business in a different direction soon enough
5) Not paying enough attention to what the financials are saying every month
6) Taking too much money out of the business too early
7) Employees not having the right skill set
8) Not understanding the market and consumer behaviour
Lack of business skills, not technical skills I believe is the number one reason. That and a lack of selling skills. At start up you have time, which can be turned into income, but talking to people who don't buy costs the business a fortune in lost income.
Misunderstanding the market in which the business is engaged.
Misunderstanding the competition.
An unwillingness to adjust when it becomes apparent that "the product" isn't selling.
Every failure comes with an excuse of slowdown, lack of skills, absence of culture, finance and competition.
Theodore Levitt says Every major industry was once a growth industry. But some that are now riding a wave of growth enthusiasm are very much in the shadow of decline. Others, which are thought of as seasoned growth industries, have actually stopped growing. In every case the growth is threatened, slowed, or stopped is not because the market is saturated. It is because there has been a failure of management.
In my opinion, Start-ups fail in forming a vision/strategy and if they have a vision & strategy in place, they fail transforming it in balanced score card and day to day activity. All the internal and external factors follows later. Start-up fails because its management fails.
Hi Kevin, I would have to say that one of the biggest reasons that I feel why most start-ups fail is that, they don't take enough risks.
The opportunities to learn are endless so start-ups shouldn’t be afraid to break out of their comfort zones. Embracing every opportunity that comes their way is key for growth.
Adding up a few more, it could also hold the reason of not knowing the possibilities of solving the problems of their consumers; instead of devising a product they do come with the new ideas that still extends the road wider with no solution.
One other causes would be the improper leadership that drops out a better action, operation and many to go.
A better focus knowing the competitive edge will always thrive in a beneficial value.
Start-up fails because they don't have enough source and knowledge to build up their projects. Their main aim is to target money not for client satisfaction. And most importantly they don't know the marketing standards.
1) Undercapitalization at start-up is THE key factor.
2) Owners take too much money out of the business as they see $ start flowing in.
3) Unrealistic expectations about the amount of time and effort that's involved in running a business.
4) Trying to do everything without having a support team in place. No one can be equally good at providing the good or service, looking after the money and finances, and promoting the product or business. Do what you are most PASSIONATE about doing, and hire good people with integrity to help you with the rest.