Why Startups Fail

Mukesh Gupta

There has been enough written about startups and the reasons why almost all of them fail. So, why write another post about this? Even though there is no dearth of resources (blogs, videos, books, stories, etc.) on reasons why startups fail and how to avoid it, I don’t see any reduction in the failure rates of startups; I don’t see them learning from the mistakes of other failed startups; I don’t see them focusing on the things that can help them avoid failure.

It is crucial to understand that building a startup is not like a chemical reaction – add the right resources, under the right environment, and be certain of the results you will get. Starting and running a startup is a complex system with too many moving parts, and any change in any of them could trigger a flow of events that could end in a catastrophe for the startup. Given this understanding, there are still things that startup founders could control, things that can significantly improve the probability of success.

Solving the wrong problem

The reason to go out and start a business is to find a good problem to solve. It need not be a totally new problem that needs solving (while having something like that could have its own benefits and challenges).

Most startups fail by not solving a pressing enough problem or pressing enough for a specific kind of audience, either themselves and people like them, or specific people and people like them.

So, before going off and starting to build something, startup founders must define clear answers, with no ambiguity, to the following questions:

  • What problem are we trying to solve and for whom?
  • Why is this a pressing problem for them?
  • Do they know about this problem?
  • Are they actively looking to solve this? Or are they content with the workarounds?
  • How strong is their propensity for change?
  • What do they do to address this problem now?
  • Who else is trying to solve this problem for them now?
  • Are there any constraints that the solution needs to be built under? What are they? Why are they constraints? Are these constraints self-imposed or real?
  • What is the ecosystem your solution needs to work within?
  • How will you reach and talk to this audience? Do you have their ears?

In order to find answers to some of these questions, you need to be able to access the potential customers of the product or the solution. In my experience, this is the biggest variable that could determine the startup’s fate. Most startups don’t have access to the potential customers nor do they ask these tough questions at the start of their journey.

The solution is not compelling enough

Once we have answers to these questions, the next step is to come up with ideas to solve the problem. In my experience, it is not easy to come up with ideas that not only solve the problem in an interesting way but also make it compelling enough for the audience to explore and adopt.

This requires multiple iterations. The mistake that most startups do is that they fall in love with their own ideas. They fail to test these ideas on three parameters:

  1. Does it solve the problem for the audience within the constraints that were identified earlier?
  1. Is it compelling enough for the audience to take action and change?
  1. Does the solution make it easy for the audience to make the change?

Getting the answers requires the startup to go back and ask its target audience these questions.

Another mistake that most startups make is to take customers’ feedback at face value. Behavioral psychologists have proven that, when asked for feedback, most people share what they think is expected of them rather than their true thoughts and feelings. We need a way to avoid this bias while seeking feedback.

Failing to find enough customers

The last major hurdle to cross is finding and engaging enough prospects. The mistake that almost all startups make is to put marketing of the product or solution at the end of the process. I strongly believe that a startup should be thinking about how to market the product (or solution) right from the start.

If done well, this could lead to creating hooks in the product or solution that make it attractive for any customer to become an advocate. It could also help the solution to be found easily by the right audience.

Just having a good solution to a compelling problem is not enough for it to succeed. You need to get the solution in front of the right audience at the right time to be considered. You need a good team of sales professionals who not only understand the solution but also have the full picture of what problem it solves for whom and why makes it compelling for the audience.

Most startups get this step wrong. Good PR is not enough. Reviews on a tech site are not enough. Being featured in prominent blogs is not enough. You need to be in front of the right kind of audience, at the right time. It is not enough to solve the problem in an interesting and compelling way, you also need to sell the solution to the audience.

There are a lot of other reasons, why startups could fail. Here is a list of 20 reasons why startups fail.

How to remove this obstacle to startup success

Corporate accelerators offer a glimpse of hope to address the challenge of access to potential customers – to validate the problem that a startup is trying to solve and test the potential solution with the target audience.

These corporate accelerators serve these startups by providing them access to their customers, technology, experts, and capital. If the incubators can provide these to startups, the probability of success increases significantly. While this still doesn’t guarantee success, it at least gives the startups a decent chance to fight it out and not lose even before they start.

The next level of challenge for a startup founder is to pick the right accelerator for their solution. This depends on the target audience’s problem the startup is trying to solve. The right accelerator offers access to the right customers, technology, experts, and capital (preferably, in that order).

Become a part of an accelerator. Learn about SAP.iO and apply today.

This post originally appeared on “Musings of a Salesman” and has been republished here with permission.


Mukesh Gupta

About Mukesh Gupta

Mukesh Gupta previously held the role of Executive Liaison for the SAP User group in India. He worked as the bridge between the User group and SAP (Development, Consulting, Sales and product management).