I am sure you all know that there are various surveys, studies and analysis done globally which conclude that majority of start-ups fail.
If this statement makes you feel uncomfortable, it is meant to.
Because unless you feel uncomfortable and, therefore, become more careful you will join the 80%. However, if you do things right and in the right way, there is no reason why you won’t be in the 20%. Since, my company works with start-ups and SME’s for a living; we have interacted with lots of eager beavers… (Young ones with dream, gleam and dollars in their eyes) and have, sadly, seen many of them with same eyes with emotions replaced by dejection, a sense of failure and brooding about their future.
So why this 80% failure rate, here are some of the reasons that I have observed:
1. Doing a start-up because everyone around me is doing. Sometimes when I am at various events, meetings and mentoring sessions I feel as if “doing” a start-up has become a game for both the people and the investors. These are strong words but I hope you know what I am talking about.
2. Weak business model. We all know that most of the start-ups today (especially in e-commerce space) are running in losses. We all know that if we buy something at Rs. 100 and sell at Rs. 80 and use the investor funds (which I believe are more easily available than ever before) to bridge the gap, it will eventually fall flat. Loss leading philosophy can work but only if it is well thought out, is reasonable to execute and turns around to profits within a reasonable time frame and at a reasonable scale. Now, I don’t want to take names here but there are companies and investors which have gone from launch, to seed, to Series A, B etc. and are still not making money. Every next line of investors puts in money at a higher valuation hoping to get an exit at an even higher valuation, but if the basic business model and execution is not sound how long do you think this climbing on each other’s back can happen……I leave the answer to you.
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