Why are the Startups are failing? What does a Failed Startup teach?

(Last Updated On: 24/10/2018)

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What does a failed startup teach? Why are the Startups are failing?


Startup Failure Reasons Reasons of startupFailure Startup Failure

Failure of your startup can teach many valuable lessons and actually strengthen you – emotionally and professionally – for yet another entrepreneurial journey.

Here are some things that you could learn if you introspect and think about why the startup failed:

  • About the product/service: Was the product or service relevant to consumers/customers? Was the experience of using the product/service good? If the answers to these questions are negative, you could learn about what you could have done better in designing the product/service.
  • Was the value proposition meaningful: Was the product/service addressing a genuine need? Was it solving a problem for consumers/customers or was it making their life simpler or offering the product/service at a lower price than competition or was it fulfilling an emotion need (e.g. status in the case of premium products). If the answer to this is negative, you need to introspect and figure out whether consumers really had a need for the product or did you ‘manufacture’ a need because you invented some product/service.
  • Was the positioning right: When I was younger, a new brand of packaged burgers was launched under the name ‘Big Bite’. It was an awesome product and priced just right. But, it was actually a mini snack… not actually a big bite. However, consumers, including me, had seen the product being advertised as a ‘BIG BITE’ and expected a ‘BIG BITE”…. and we were disappointed at seeing the actual size of the snack. Now, I feel that if the company had called the snack a ‘Mini Bite’, the product could have been a huge success. This was, to my mind, a big lesson on a great product at a good price-pint getting killed because of over-promise and incorrect positioning.

Startup in bihar

  • Was the communication clear: Sometimes even with a great product which addresses a real need, the brand communication is just so unclear or disgusting that the company just does not get enough sales as it would have with more appropriate communication. Often companies led by techies underestimate the power and importance of quality communication.
  • Was the price-point right: At the concept test stage, it is important to test the product/service at different price-points  is critical (even if not in the actual marketplace, doing customer research by talking to potential buyers)
  • Were the processes appropriate for the venture: Operational issues and mismanagement of the operations process are one of the most common reasons for startups to fail. Often we see startups do well at the initial phases but falter when it comes to doing the same business at a different scale. Introspecting on whether aspects of operations planning could have been different can teach some very valuable lessons.

What does a failed startup teach

  • Was the team right: Did the team have competencies that were required for the venture. OR if they did not, did they know what they did not know and therefore were they able to reach out to advisors, mentors, and consultants or experts who could have helped them in the journey. Sometimes despite having a great team, the team dynamics do not work right. It is also important to have one of the founders declared as the CEO. There has to be one person who is calling the shots and where the buck stope. If there are 2-3 or more founders, each of whom has equal say in the direction and decision making, it often leads to chaos. Introspect and see if you went wrong on the people front.
  • Was the company adequately funded: Many startups choke because they run out of funds. The exuberance and confidence make many founders more optimistic than practically possible, and this means they end up raising lesser capital than was necessary for the business. Evaluate if you funded your startup right.
  • Changing the business model often: One of the most common mistakes entrepreneurs make is to make changes in strategy and direction too often and without giving enough time for one strategy to be implemented. Often this change is considered as being nimble and is assumed to be the nature of being a startup. However, while it is possible for startups to change direction when you do so should be a very well debated and considered decision.

startup failure

Add-ons points:-

The failure itself teaches nothing.  There are so many potential reasons, and so few with enough of a perspective to sort through them all and come up with a coherent and credible theory for how a different outcome could have been achieved.  It’s a big “what if” game leading nowhere.

However, startups while still alive often provide unparalleled learning opportunities.  It’s the nature of startups that just about every person in one has had to go outside their comfort zone more than they would have at a larger company where they have policies and specialists for everything.

For example, as a developer at a startup, I was never just writing code.  I had to learn enough to fill in for IT or QA, release engineering or support, I had to go out on the road to talk to current or potential investors and customers, and so on.  It was often uncomfortable or tedious or both at once, but I learned more than I ever could have any other way.
startup failure stories
Either way, failure teaches you that you do not have the right to take success for granted. It teaches you that your assumptions and your beliefs may not always be right and that you should validate them. It teaches you the value of being frugal, and that being resource starved actually could lead to more innovation & creativity.

It teaches you that planning is important, and failing to plan is planning to fail. Failure makes you stronger. It gives you the confidence to face bigger challenges than you previously had. It often shows you who your real supporters & friends are, and who were just enjoying a ride with you while the going was tough.

startup failed

One way to fail startup which you’ll work to avoid next time.

Hopefully, some positive things about how to run a business, build technology products, mold fresh graduates into superhuman engineers, market and sell what you’ve built, etc.

startup failure rate

Failure can teach you a lot if you introspect and think about what went wrong, and make an attempt to do things differently when you embark on the journey again.
Don’t worry about an outcome you couldn’t control.  Treasure the experience, and use it to get a head start next time.
Get up. Dust yourself. Get going.

Thanks.

Prabhakar Alok

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