Why Do Startups Fail?
“Life’s too short to build something nobody wants.”
– Ash Maurya
Startups focus only on building and not on the customers
Most of the startups are excited about building the products first with the basis of the idea they have in mind. They rarely interact and involve their customers in this process.
The normal procedure is:
The founder gets an idea -> Build a solution -> Tries to sell it -> Nobody buys the solution -> Startup gets depleted on money -> The startup dies.
In fact, the case should be that your one and the only goal should be to solve the meaningful problem of your customer. This will only happen when you have interacted with enough customers. This will help you know if there is a need for your product.
Now, this is crucial because CBInsights reports suggest that 42% of startups fail because they didn’t solve a market need. They failed because they didn’t put others first.
We hope you don’t want to be one.
Product Without Business Model
Most of the startups follow “Just Do It” method of business. This may work if you have sufficient background about all the aspects of your business. But most of the time we don’t. We may be very good at technical aspects but not so good on the marketing and sales strategies. We naturally go on to the easiest part i.e building a product.
One of the most common causes of failure in the startup world is that entrepreneurs are too optimistic about how easy it will be to acquire customers. They think one’s they have to build a product or service, customers will come to their doorsteps. This may be the case for the first few customers, but after that, the cost of acquiring new customers (CAC) becomes more expensive. Sometimes it goes more than the lifetime value of that customer (LTV).
This is very hard to keep track of if you don’t have a proper business model that gives you deep clarity about your startup.
This means doing too much too early.
Once we think we are ready with the product, we become excited about scaling our startup. You try to accumulate funds for it. You start hiring. You start expanding. Nothing wrong in that. But these things if not done in a correct order can have a huge impact.
According to the Startup Genome Project survey, about 70% of startups scale up too early. They even go as far as saying it can explain up to 90% of failed startups.
The main goal of any startup should be:
1) Getting a good product for a good market
2) Consistently acquiring good customers for less customer acquisition cost.
Before scaling your startup, you have to see if these points are validated.
Have an idea? Planning for a startup?
Brainstorm with us to explore different avenues and get more clarity about the idea through our Discovery Sessions.