Why Most Startups Fail?

TASNIA PONKTI
3 min readNov 23, 2020
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It seems that the majority of the startups fail [2] despite taking the right initial steps. But why?

Without any ado, these are the commonly seen reasons why most startups fail according to my observations:

First of all, a business needs to sell a product or service that people are willing to buy i.e, it needs to have a potential market value now and in the future. There needs to be a clear vision or idea about what you are offering through your business. The idea doesn’t have to be magnificent, it can be something simple but essential. And it is better if it is an original idea. Investors invest in startups primarily on the product or service outlook first.

Secondly, the business needs to execute the production process efficiently, effectively, and maintain it for a long period of time. When the product idea itself is too complex, not viable, or executable compared to the resources available (such as cost, expertise, technologies, etc), it leads to service interruptions.

The third challenge is bad leadership and management which leads to a lack of communication, collaboration, and ultimately demise to product or service maintenance failure as well. Building a team with a large group of experts does not always ensure the smooth delivery of a product or service in a business. Employee retention is as important as customer retention.

The fourth issue is the lack of marketing. You have a great business model planned, a good source of initial funding, a great team built with expert employees but not many people know about what you are selling. Hence, it neither attracts good customers, nor employees.

There are many other reasons which can make a startup fail, namely the location or environment, social or political issues, or even a disaster (think about COVID-19 as an example). However, most of those other issues are somewhat related to the top four issues I mentioned.

A business should be built upon a great vision, and it should be planned out thoroughly. But the execution of such elaborate plans is a totally different ball game that brings new variables to light as the startup faces new challenges. So a business entrepreneur and his/her strategic team should also be agile and adaptive enough to change their needs to fit the end goal.

A startup needs to have a good flow of funding and it starts losing it because of all the aforementioned reasons and more.

And now I will show you what the statistics say and you can see that most of the issues can be related to the above four issues I have mentioned [1] :

Source: [1]

You can go and check the full article to see the other charts of different criteria:

[1] Decoding Startup Failure: Why 193 Failed Startups Didn’t Survive

[2] https://review42.com/what-percentage-of-startups-fail/

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TASNIA PONKTI
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A senior electrical engineer and lifelong Science & Tech Enthusiast. Active on WordPress, Quora, and Patreon. https://www.patreon.com/tasniaponkti