look news india
There is tremendous enthusiasm among the youth about entrepreneurship and startup culture all over the world including India. Everyone is dreaming of leaving their job and becoming their own boss and building a unicorn company. But the ground reality is completely different from this glamor. Data from global startup research and industry reports show that 90 percent of startups fail within the first five years. Only 10 percent of the businesses are able to survive in the market and even among them, only selected companies are able to earn profits. Before starting any new venture, it is not enough to rely only on the idea; It is most important to understand the bitter business rules and ground challenges behind it.
The biggest and first reason for startup failure is that the founders invest all their energy and capital in creating a product or service which is not actually needed in the market. In business language this is called ‘Lack of Product-Market Fit’.
Often new entrepreneurs fall so much in love with their idea that they begin large-scale production or development without getting actual feedback from customers. When the product is made and launched in the market, it is found that people are praising it, but are not ready to take out money from their pockets for it. Business doesn’t just run on a beautiful idea, it depends on solving a real pain point and the customer’s willingness to pay for it. If you start a business only on the basis of your concept without doing any ground survey, then it is almost certain to fail.
In the business world, cash is considered oxygen. No matter how revolutionary the idea of any company is, if the money in the bank account runs out then the shutters are sure to fall. The second biggest reason for the closure of startups is ‘running out of cash’ i.e. cash crisis.
In the initial stages, many founders assume that they will soon get funding from angel investors or venture capitalists (VC). In this hope, they start spending money indiscriminately on expensive offices, heavy marketing campaigns and unnecessary hiring (High Burn Rate). When market conditions deteriorate or funding rounds are delayed, the company is left with no money to pay employee salaries and meet day-to-day operational expenses. Until your business starts generating its own positive cash flow, every rupee should be spent very wisely. Strengthening the unit economics of a business by remaining bootstrapped is the first condition to become a long-haul horse.
A single person can never build a big business empire. To make any startup successful, a strong, balanced and dedicated team is needed. The third most lethal reason for startups to fail is choosing the wrong team and internal discord among co-founders.
Often people make their friends or relatives as co-founders without checking their skills and commitment. In the beginning, when everything seems good, there are no problems, but as the business incurs losses, stress or pressure of funds increases, disputes over vision and responsibilities start between the co-founders. Additionally, lack of a well-coordinated team across technology, sales, finance and operations also sinks a startup. If the team does not have the patience and mutual trust to fight difficult situations, then even the best business model collapses like a house of cards.
Always adopt a ‘Lean Startup’ approach before starting a business. First, create a Minimum Viable Product (MVP) and test it among a limited number of customers. Don’t make big investments until customers start buying your product again and again. Be sure to include at least 12 to 18 months of cash runway (the ability to survive without new revenue) in your financial plan. Finally, choose co-founders and partners who can complement your shortcomings with their strengths, not just those with similar skills to yours.