Why startups fail and how you can avoid it

While most startups aspire to be the next multinational company that sweeps the headlines, many fail on their journey. To increase your startup’s success meter, we’ve listed out some of the top blunders startups do that steer them off the right path – so you can avoid them, and scale up!

"What do you need to start a business? Three simple things: know your product better than anyone, know your customer, and have a burning desire to succeed." 

Founder of Wendy's, Dave Thomas 

#1 Ignoring the market

The top reason startups fail according to CB Insights analysis is the lack of market demand for their product or service. Some startups offer grand solutions that have no need in the market, assuming that customers will appear – out of nowhere. 

The internet grew at an unprecedented speed, and some companies were able to ride that wave – catering to a customer segment that never existed – while some joined the movement too late.

Major shifts in markets such as the internet revolution don’t occur often; hence, it’s vital for startups to conduct thorough market research before they launch or build on their product. By doing this, entrepreneurs can expect a real market opportunity. 

Great ideas do not succeed in isolation – they succeed because they solve pain points for their customers. 

#2 Ideas without action plans

Brilliant ideas can be looking us straight in the eye; however, startups that have brilliant ideas can only succeed if they plan ahead. As an aspiring entrepreneur, you can set up a 5-year and 10-year plan, which clearly outlines that there is a possibility for your business to scale. 

Good business models account for all primary functions, from finance to marketing, and help entrepreneurs remain on the right path – even when operations get hectic.  

These models don’t only encompass internal relations, it also gathers an overview of how the startup will get investments, receive training on pitching to investors, find the right mentorship or help from successors, and conduct a strategy that identifies the startup’s goals and mission. 

Successful startups are scalable and have a set plan for operations. 

#3 Scaling too quickly 

When building a startup, much like building a house, patience is key. A startup’s concrete must be durable and established before it decides to scale, simply because too much can happen too fast.

Here’s how startups can scale: 

  1. Thoroughly research your target audience
  2. Establish your startup’s goals
  3. Get feedback after launching a demo
  4. Improve your product/service based on feedback
  5. Begin marketing your startup
  6. Maintain customers
  7. Scale

“You fall down 100 times, you get up 100 times, you learn 100 lessons” 

Professional Boxer, Mike Tyson

The mindset of a successful entrepreneur

Flexibility distinguishes startups from large corporations that are holding on to a top-down organizational structure. The 21st century’s global market demands quick results, actions, and reactions; hence, it demands flexibility.  

To keep room for innovation and allow space for ideas to grow, entrepreneurs should maintain open communication within their organizational structure.

“The question I ask myself almost every day is, ‘Am I doing the most important thing I could be doing?’” -- Mark Zuckerberg.” 

Below are the 3 key components that drive successful startups:

  1. Listen attentively. Entrepreneurs should actively listen to their industry, and fully comprehend how their product is offering value to the market. 
  2. Process realistically. Passion is remarkable when mixed with analytical skills and reality; by reflecting on your product’s offerings and pilot feedback, you can make more informed decisions. 
  3. Execute without limits. After outlining realistic expectations, you are now free to execute ideas without boundaries. Even if you are met with challenges, you can get assistance from a mentor, and do it again.

Listening to the market, building a detailed action plan and choosing the right time scale are all factors that can determine the success of a startup. 


[1] CB Insights, The Top 20 Reasons Startups Fail, February 2018