Why Do Startups Fail?-A Lesson For Upcoming Entrepreneurs

“The best startups generally come from somebody needing to scratch an itch.” – Michael Arrington, TechCrunch founder, and co-editor

As the rate of unemployment increased, job seekers have felt the change of strategy for their better future. They drafted out many ways and the most innovative idea was to be a job creator. By being a job creator they did not only remove the label of unemployed but also they don’t need to work under a head anymore. They were the boss of their respective company. They easily implemented their own ideas. Some of them have succeeded and even few of them have brought about an economic revolution. Alas! There was a sample number of startups whose business closed in a quick time. They lost the money as well as the time they spent on building their product. The million dollar question is, why they failed?  We at DataCaptive figure out the reasons for their failure by investigating a number of startups.

Not pivoting away

Affected 7% startups

We get ideas, implement them, and hire people. But it’s important to track their progress. You can’t be stubborn while running the business. If your ego doesn’t let you divert away from an idea, then it will lead you to nowhere. By not hiring the right candidate and then letting your emotions to dominate you will only lead to failure of your business.

“Every day that we spent not improving our products was a wasted day.” – Joel Spolsky, Stack Exchange CEO

 Not Using Network

Affected 8% startups

Networking is an important aspect of life. We can’t do things on our own. We need help from other people. The cofounders of 8% of failure startups didn’t use their own network to the fullest nor the connections of their investors.

Legal Issues

Affected 8% startups

Every startup wants to expand its base. But legal issues can take place if they land the different business. Launching business across the world can be a real challenge. You have to undergo a lot of legal stuff in another country.

Lack of financing/ less investor intersect

Affected 8% startups

Money is the fundamental unit for setting any business. If there is less money your ideas will remain virtual and you will not be able to implement them at the physical level. Investors play an important in financing. They will finance you, provided that you have a good business plan and how you have presented it to them.

Bad geography

Affected 9% startups

If everything is going well. You possess skilled staff, the product is also very good. But to make it successful one needs to bring their products to the audience. Long distance means less communication between the audience and the firms. Especially the remote startups are not able to showcase their services to the audience in a proper manner.


Affected 9% startups

Many people work for the sake of money only. They have a good idea, but the lack of passion and knowledge of the particular concept will ultimately lead to failure.

“If you just work on stuff that you like and you’re passionate about, you don’t have to have a master plan with how things will play out.” -Mark Zuckerberg, Facebook founder

Lack of harmony

Affected 13% startups

A startup is a team of people, most of whom are investors. It’s important to have a rapport with them. Ignoring the investor demands will create discord between the parties or disharmony among the team members will not yield anything.

Launching product at an inappropriate time

Affected 13% startups

It’s very important to check current market trends and work parallelly with them. Launching product before or after the right time will result in the market loss. E.g. you are making a mobile with android version 8.0 (Oreo) which is the latest version. Launching it at the time when there is a demand will be perfect, but if you plan to launch it after some time (say one year) it wouldn’t work. Because a new version of Android may be released.

“If you are not embarrassed by the first version of your product, you’ve launched too late.” – Reid Hoffman, LinkedIn co-founder

Not taking customers’ feedback

Affected 14% startups

When we showcase our products to the audience it’s important to know how they felt about it. Because after all, it’s the customer who uses our products. By taking their feedback we can further enhance our products. But if we ignore customers and continue building products on our own ideas, our products will ultimately remain in our warehouse.

“Your most unhappy customers are your greatest source of learning.” Bill Gates, Microsoft co-founder

Poor marketing

Affected 14% startups

It doesn’t matter how good your product is, if you don’t advertise it, your product will not reach anywhere. Because the audience is unaware of your product’s existence. It’s been found that co-founders of failed startups assumed that their product will advertise on its own.

No business model

Affected 17% startups

When you get a great idea it’s not easy to bring it to a physical level. One needs a proper strategy to shore up their idea. It’s also important to predict the output of product. As we have already said how founders of failed startups gave more importance to their gut feeling than market demand. One can easily predict future of his/her startup by using the formula,

CAC / LTV “Rule”

The rule is very simple:

CAC must be less than LTV


CAC is the Cost of Acquiring a Customer

LTV is the Lifetime Value of a Customer

To calculate CAC, take the total cost of your sales and marketing affairs and divide that by the total number of customers.

To calculate LTV, look at the gross margin associated with the customer (net of all installation, support, and operational expenses) over their lifetime.

“Get five or six of your smartest friends in a room and ask them to rate your idea.” – Mark Pincus, Zynga CEO

Not a user-friendly product

Affected 17% startups

Nowadays customer demands a product that will fulfill his requirement in a customized manner.  E.g.; if he wants a product for calling, he wants other stuff also embedded in that like messaging, camera, music and in addition to that he wants the product to more durable and portable.

You just have to pay attention to what people need and what has not been done.” – Russell Simmons, Def Jam founder

Product is expensive

Affected 18% startups

The middle class and lower class people from the majority of world population. If you want to target the maximum audience then you need to know how to focus on these people. E.g.; Xiaomi produces low budget smartphones and today it’s the world leader in smartphones. Some people went greedy and they sell their products at an expensive rate and ultimately they found themselves in the loss.

Not having the right team

Affected 23% startups

For implementing an excellent idea, you need a skilled manpower. You can’t be driven by your emotions and involve your dear ones in your firm.  It’s also very important that you select the right person for the right job. You can’t tell an MBA graduate, to code or you can’t tell a coder to market products.

“You don’t need to have a 100-person company to develop that idea.” – Larry Page, Google co-founder

No cash left

Affected 29% startups

While doing business, money and time are finite. We get a bundle of ideas and we want to implement all of them as soon as possible. But while implementing these ideas we also invest our money in it. And tomorrow when we check our pocket we find it empty. It’s very important to manage your money and that is exactly where most startups have failed.

No market demand

Affected 42% startups

You might get a great idea. But before implementing it you need it look it through the window of practicality. You get excited by implementing your idea and at end of the day, you found that you are the only person who is happy with that product. Because frankly, the target audience does not want it! They will not buy your product based on your emotions rather they will do so on their requirement. This factor is the major cause of failure for most of the startups. Before launching their product they don’t check the market trends and end up incurring losses.

“See things in the present, even if they are in the future.” – Larry Ellison, Oracle co-founder

 There is a famous quote, “Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.” The objective of writing this article is to tell new entrepreneurs to be wise men. It’s better for them to observe above points while they start their new startup.

We wish upcoming entrepreneurs, all the best for their startups. We also want to tell the failed startup founders to be optimistic and their failure is only a stepping stone to a subsequent success story!

Author bio:- 

Amberlynn Adam

Blogger, Content Developer & Editor. Amberlynn is a Content Marketing Professional and is an integral part of DataCaptive since its inception. She holds a passion for tracking new changes in the ever-evolving business world and putting them down in the form of blogs to encourage intelligent discussions & thought exchange. Apart from writing, reading fiction and thriller novels are her major interests.

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