Why Startups Fail? Part 2
11. Lose Focus (13%)
The basic idea of a startup is almost always changing. Sometimes startups are doing a full project’s restart using new ideas. And when you think over the possibility to add some secondary functions, which “would not hurt.” That’s where the main and unique idea gets lost among others.
- Disharmony on team/investors (13%)
Let’s talk about disharmony with investors. It is important to attract smart money – an investor who understands the particular startups and markets and has knowledge which can help, as well as acquaintances and other resources. Then the explaining of something to him will be much easier.
Sometimes startups attract non-core investors who have heard about “Facebook success” and expect fast super profits. There are cases where the investor has come three months after the start of the project and asked about profits. What happened when the founder replied that there is no money, it is better to tell in a separate article.
Also co-founders’ disagreement can become a huge problem of the project, when a manager wants some decisions, and the other sees future tasks from the other view. Startup’ resources are never enough, especially for the implementation of key decisions from several people. That is why it is important to divide responsibilities and somehow regulate the relations, as well as agree on a possible exit from the project if there will be strong disputes.
- Pivot gone bad (10%)
Project pivoting does not always go smoothly and successfully. If it is clear that the original idea has significant problems, it is important to restart the project on time, when you still have the resources. And, of course, you must do it the right way. You must made right conclusions from your first failure, or quit from the project because you may take even more risks the second time.
- Lack of Passion (9%)
Sometimes a startup idea ceases to please the creator. Sometimes he has new opportunities, or the market was not as interesting as it was represented, or creator is simply lost his wish to continue the project.
- Bad Location (9%)
It seems that online project can be done remotely. But if we are in India, for example, and want to do a project for the United States, we will need:
– legal support and spot registration;
– understanding of the mentality and characteristics of users;
– accounts in local banks;
– local representatives for business meetings.
That’s why US investors are investing primarily in startups whose teams are in the United States. Moreover, in 95% “rule of two hours” has its influence on the project: team or at least founder, should be no more than two hours away from the office of the investor.
- No financing or investor interest (8%)
It mostly refers to the innovative ideas that cannot be understand by anybody, except the author. People do not provide investments for things they do not understand. Google founders went on Silicon Valley and asked for a million dollars of investment, and nobody gave it to them, because they do not understood the idea of the project. As a result, one IT entrepreneur has agreed to give them $ 100 thousand on certain conditions.
- Legal challenges (8%)
Often there are legal constraints, like registered patents, copyrights on the content or unconscious violation of companies’ rights and problems associated with it. People often faces with infringement of copyright. For some reason, many startups do not think that every text, images, or even idea are owned by someone, and official owner took care about legal protection.
- Don’t use network/advisors (8%)
Not everyone can or want to use their acquaintances, but a good entrepreneur must use all existing chances. Also many issues can be solved through personal connections, it is one of most powerful instruments in business as well as in every day’s life.
- Burnout (8%)
A common problem of those who is working a lot. When you start a startup all are burning with new idea, willing to work day and night, and that’s fine. But if you do not maintain a balance, you can get depressed and abandon your work.
- Failure to pivot (7%)
Not everyone is ready to go for a significant change in his ideas. Most startupers go through with the wrong idea and in the end they run out of money, people are firing, partners are leaving and startup dies.
Make a successful startup is really difficult issue, especially in the field of Internet business, as were shown in remarkable research named The R.I.P. Report. Yet there is a chance to be success by acting wisely, following simple empirical rules.
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CB Insights interviewed startup founders about why they failed, and sorted these reasons into 20 distinct categories. You’ll notice that the sum>>>