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Why do startups fail?

90% of startups fail in general while 99% of consumer internet companies fail.

Why do startups fail?
Startup seems to be the answer to all the problems of the world. Yet, 90% of startups fail in general while 99% of consumer internet companies fail. All of this because they failed to acquire and retain enough number of users.

Below are the top five common reasons why startups fail:
Lack of planning: It’s the world of “move fast and break things” – a philosophy given by Mark Zuckerberg. And startups often take it without a pinch of salt. They think planning will slow them down and would affect business. On the contrary, planning helps in wastage of resources, cuts cost and directs efforts towards achievement of goals. Even Facebook does make quarterly and six-monthly plans.
Vague business model: Startups generally are born because they stumble across a problem that they want to solve. While in theory this is a great idea, they often forget that their customers may not be looking to solve the same problem in the same way as the startups are. They make business models with too many optimistic assumptions about customer acquisition. Simply building an attractive website or mobile application alone is never enough. They need to also ascertain worst case scenarios and incorporate contingencies in the business model. An ideal business model must aim to work in all circumstances and would be focused on quality.
Expanding without being ready: Early day successes can be very tempting for startups. And they are often led to believe what works in California will automatically click in Texas. Here’s where they are wrong. While initial market study does give you a fair idea to startup, the same is required at every step of the expansion. In the world of online startups, infrastructure is not such a huge problem as it used to be earlier, yet even in terms of customer acquisition there are infrastructure considerations that vary from place to place and time to time.
Lack of team effort: Funded startups are notorious for firing employees when they deem fit because when they were not funded, they had recruited inefficient team members or had never given efficiency a thought. When you have recruited inefficient people right at the start of the business, it’s likely that you may have begun an unsaid culture of inefficiency. It’s very important to be able to judge people’s capacity while recruiting. Given that startups often don’t have a plethora of options due to cost constraints, yet, this is more of a mind skill than money problem.
Failure to tap mobile technology: This is the latest entrant in the reasons of startup failures because our customers have changed. And today, any startup that doesn’t think Mobile-First may already be on a shaky spot. Mobile phone companies have re-invented the sizes and resolutions of phones because consumers are doing their day to day tasks on mobile phones – personal or professional. From local coffee shops to government enterprises, everyone is just bringing services on the mobile phone. This becomes crucial not only for technology and tech-enabled startups but offline services too. If you are not on mobile, you don’t exist in the startup or business world.

So before you start up or while you are running a startup, consider the following questions –
- How pressing is the problem you are trying to solve?
- Would your customers have approached the problem the way you did?
- Do you have a concrete Plan B?
- Does your business model work in most situations?
- Is your cost of acquiring customers more than the cost of retaining them?
- Are you spending a lot of money on customer acquisition?
- Are you measuring success and learning from failures?

If you need help in building a viable startup especially in the field of tech-enabled services or mobile applications, give us a call.

About Vinfotech

Vinfotech has developed the hottest digital products for some of the most ambitious enterprises and startups around the world. We believe in design thinking-led software product development and are a service provider of full product development lifecycle, creating best-in-class web & mobile products. We build consistently awesome e-commerce experiences that continue to charm users and keep them coming back. Our digital offering includes development of intuitive and stunning mobile applications.

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