Why Do Startup Fails ?
1. No market demand for your product
What we see too often in the startup scene is that a number of companies believe their invention is so appealing that the market will beg for it and money will begin to flow in. Most startup founders do not fully understand what their product might be able to achieve in the market – especially in the early stages. That is the reason for many pivots – when a company changes its course and product to satisfy another market. If they could validate their product in pilot projects before launching, or even beta-testing instead, those entrepreneurs might reduce significantly their failure and market rejection risk.
2. Business Model Failure
As outlined in the introduction to Business Models section, after spending time with hundreds of startups, I realized that one of the most common causes of failure in the startup world is that entrepreneurs are too optimistic about how easy it will be to acquire customers. They assume that because they will build an interesting web site, product, or service, that customers will beat a path to their door. That may happen with the first few customers, but after that, it rapidly becomes an expensive task to attract and win customers, and in many cases the cost of acquiring the customer (CAC) is actually higher than the lifetime value of that customer (LTV).
The observation that you have to be able to acquire your customers for less money than they will generate in value of the lifetime of your relationship with them is stunningly obvious. Yet despite that, I see the vast majority of entrepreneurs failing to pay adequate attention to figuring out a realistic cost of customer acquisition. A very large number of the business plans that I see as a venture capitalist have no thought given to this critical number, and as I work through the topic with the entrepreneur, they often begin to realize that their business model may not work because CAC will be greater than LTV.
3. Lack Of Funds
Twenty-four percent of startups said that running out of money contributed to failure, while another 13% struggled to get financing. Cash is king for startups. Even a successful business model will fail without proper cash flow.
4. Poor marketing
At the same time, it’s common even for products that fit the market, to lack proper marketing. Companies either sell their products in a way that doesn’t attract an audience, or they don’t understand what it is that people really want and try to push the wrong features. You can have the best product in the world, but if no one knows about it and isn’t appealing, then it won’t sell. Captivated by their product, many startup founders tend to neglect marketing efforts.
5. Wrong team
Sometimes it can happen that however much expertise a team-member has, they just aren’t up for this particular project. Startups require people that are startup-savvy. Or they may lack some vital quality to make the project successful. The further the project goes the more acute it feels.
WHY DO STARTUP FAILS ?
By TradeFlo
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