7 Reasons Why Startups Fail

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“Startup is one of the greatest platforms to make the world a better place.”

Got a great idea? You think people would love your product and you start building on it but turns out that is not the most important thing according to Bill Gross, founder of many successful startups. With a great idea you also need great timing. That is one reason why startups fail. In this article we will discuss factors leading to startup failures and essential elements to help your company succeed.

5 Essential Elements that lead to Success:

  1. Ideas
  2. Team
  3. Business Model
  4. Funding
  5. Timing

In the picture below, the first-row companies as you know are running successfully while the second-row companies couldn’t succeed despite great business model and intense funding.

The reason for their respective success and failures is timing, team execution and effort, idea, business model and money.

The customer is the true reality. You will succeed if they are willing to buy your product. Like when a movie is released you can only wait and anticipate if it will earn money or money will go down the drain.

  1. Item Mistimed

If you launch your item too early, customers might create it off as not good enough, as well as obtaining them back might be difficult if their impression of you is unfavorable. As well as if you release your item far too late, you might have missed your window of opportunity on the market.

As Stefan Seltz-Axmacher, CEO of autonomous trucking tech start-up Starsky Robotics stated,

“Timing, greater than anything else, is what I assume is to blame for our regrettable destiny. Our approach, I still believe, was the ideal one however the area was also bewildered with the unmet assurance of AI to concentrate on a functional remedy. As those developments fell short to appear, the downpour of financier rate of interest ended up being a drizzle.”

VR platform Vreal meant to build a virtual reality room for video game streamers to associate their customers and also raised virtually $12M in its 2018 Collection A. However, the available equipment as well as bandwidth abilities really did not advance as quickly as the company had expected, and though it provided on its guarantee, Vreal battled to draw in any type of significant usage:

” Sadly, the virtual reality market never created as swiftly as most of us had hoped, as well as we were definitely ahead of our time. Because of this, Vreal is closing down procedures and also our fantastic staff member are proceeding to other chances.”

For some firms on our list, an unforeseen aspect like the Covid-19 pandemic contributed to product untimeliness. AI-powered vending machine start-up Stockwell AI closed down in July 2020 as consumers stayed at house and also stayed clear of surface get in touch with. The business’s chief executive officer Paul McDonald wrote in an e-mail to TechCrunch,

” Regretfully, the current landscape has actually developed a scenario in which we can no longer continue our operations and also will certainly be winding down the company on July 1st. We are deeply thankful to our gifted team, amazing companions as well as capitalists, and also our amazing buyers that made this feasible. While this had not been the way we intended to finish this trip, we are certain that our vision of bringing the store to where individuals live, function as well as play will live on with various other impressive companies, products and services.”

  • Got Outcompeted

Despite the platitudes that startups should not take note of the competition, the reality is that once a concept gets hot or gets market validation, others might attempt to take advantage of the possibility. And while stressing over the competition is not healthy, ignoring it was also a recipe for failure in 20% of the start-up failures.

Silas Adekunle of Reach Robotics spoke about shutting down after being unable to make it in the hypercompetitive consumer hardware market in his post-mortem message, specifying:

Over the past six years, we have taken on this challenge with consistent passion and ingenuity. From the first trials of development to accelerators and funding rounds, we have fought to bring MekaMon to life and into the hands of the next generation of tech pioneers.

Founder John Rees also weighed in:

” I’m still analyzing all of it however the short variation is that it holds true what they say– that ‘hardware is hard’ and also customer equipment is even harder because of the reliance on the Xmas sales period.”

Kid’s garments distribution solution Mac & Mia located itself in a challenging place, dealing with competition from highly successful companies like Stitch Take care of, and shut down just a year after its 2018 launch:

“Mac & Mia faced a host of rivals in the youngsters’s delivery box room, including the aforementioned Stitch Take care of, which launched its youngsters garments service in 2018. Stitch Fix went public in 2017 and has a market cap around $2.7 billion. A minimum of 20 various other startups have actually released comparable shipment solutions for children’s clothing.”

  • No market requirement

Tackling issues that interest resolve rather than those that serve a market requirement was mentioned as the No. 3 reason for failure, kept in mind in 35% of situations.

Mobile-focused streaming solution Quibi, which closed down in October 2020 simply 6 months after introducing and also increasing a massive $1.8 B, located itself in this position. As reported in the Wall Street Journal, founder Jeffrey Katzenberg and president Meg Whitman claimed in a letter to employees at the time of the closure:

” … [T] below were ‘a couple of reasons’ for Quibi’s failing: The concept behind Quibi either ‘had not been solid enough to validate a stand-alone streaming service’ or the solution’s launch in the middle of a pandemic was specifically ill-timed. ‘Unfortunately, we will certainly never recognize, yet we suspect it’s been a combination of both.’”.

CEO Justin Kan of Atrium was direct concerning the problem of interfering with law office, informing TechCrunch in a meeting,.

” If you look at our initial organization design with the verticalized law office, a great deal of these companies that have this type of full stack version are not going to make it through,” Kan clarified. “A lot of these companies, Atrium included, did not identify exactly how to make a dent in operational efficiency.”.

For a company like bridal gown seller Brideside, Covid-19 prevented the requirement for its offerings:.

” With two-thirds of wedding celebrations cancelled in 2020 and an unclear year ahead, our phase has actually concerned an end.”.

A month after Paul Graham, Jessica Livingston, Trevor Blackwell, as well as Robert Morris started the Y Combinator seed accelerator in 2005, they picked “make something individuals want” as their motto.

Our research study shows that falling short to do this is one of the most convenient methods to ensure start-up failing.

  • Not the ideal team

For full article click here.

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