Whenever anybody starts a new business, he thinks that he is going to make the next big thing. Most people quit their jobs to start a new business. They dream to become the next Uber or Airbnb. But due to a lack of knowledge about the market need, competition, and more reasons startups failed. Here in this article, we will discuss the reasons why startups fail in India.
Do you know that 137,000 businesses give birth every day or 50 million per year?
But, 90% of them fail. 10% of them fail in the first year of the launch. If we do the calculation, 123,000 startups fail in India every day. Almost, 70% of the startups fail during years two through five. No doubt this data may discourage you but there is a big question why do startups fail in India?
Do not worry. You can always learn from others' mistakes & know the reason why startups fail in India.
Why do Startups fail in India?
No doubt, startups are themselves risky. But there are so many reasons that contribute to the failure of a startup. Let us have a look at the reasons why startups fail in India.
Here Are The Reasons Why Startups Fail in India?
Market problems
Many startups fail in India when they do not solve an existing market problem. This is one of the main reasons why startups fail in India.
On average, 42% of startups fail because they are not able to solve market needs.
They usually find that they have little or no market for the product they have built. It results in a huge loss for them. The main cause of this problem is that before starting up a business, they failed to understand the scope and demand of their product in the market. This is the main reason why startups fail in India.
Wrong business model
One of the common causes, why startups fail in India,is that entrepreneurs are too optimistic about how easy it will be to acquire customers. They just think building an attractive website, or service will open up the doors of success for them.
However, it is not easy to achieve this goal without an effective business model.One wrong business model and you are finished. A business model figures out a scalable way to acquire customers and monetize customers. So, always choose the best business model for your startup.
Ignoring customers
Ignoring your customers is a tried and true way to fail. Many startups do not find the time to get interacted with their users. They do not know the opinions of their customers about their products. This is where they start losing the game & the reason why startups fail in India. They fail to pay attention to their customers and adapt to their needs. So, do not take your customers for granted.
Insufficient funds
As you know that startups need sufficient time and money to operate smoothly. But nobody can tell exactly how much money one needs to spend on the business.
Almost 29% of startups fail in India due to a lack of funding.
Most startups fail because they are not able to manage sufficient funds to run their business. Why do startups fail in India, The failure to raise additional funding also affects a startup's growth.
Challenges with the development team
A common reason that causes startups to fail is the challenges with the development team.
Statistics show that almost 23% of startups fail due to the wrong team.
Let us have a look at the most common challenges faced by startup founders with a development team.
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There are many ways to improve the productivity of your development team. For example, hire a project manager to control and structure processes.
According to a report, 77% of high-performing projects have a project manager.
Strong competition
Not every business has the capability to stand strong in the competition. Most businesses fail to perform well and are forced to give up.
Do you know that almost 19% of startups fail due to their competitors?
For example, Wesabe, a failed online personal financial management service outperformed Mint. Mint carefully analyzed the weakness of Websabe's MVP. It only launched the platform when it had developed a better solution. This strategy gave Mint a competitive edge among other factors.No doubt, Wesabe was more powerful than Mint and offered more functions. But, it was more difficult to operate.
Lack of passion
Many entrepreneurs come up with great ideas but they do not sustain them in the business ecosystem due to a lack of passion. The lack of knowledge in their particular domain is the main reason to lose passion for the business. If you have the passion and proper planning, it is possible to build a product and market it successfully.
Legal challenges
Nobody wants any legal problems in their business. But by misfortune, such kinds of problems are very common in the world of business. Sometimes, a startup might face a lot of legal complexities and this can be the cause of failure. The legal challenges can create a big mess if you do not sort them out on time.
Pricing issues
Pricing is a major factor when it comes to startup success. Many startups set the prices of their products high to cover the costs. But it affects the number of customers.
For example, in 2019, the shutdown of genetic testing and wellness startup Arivale surprised its customers and partners. The reason behind the failure of the company was simple. The price of running their business was too high compared to the revenue generated by the company.
Scaling too early
Many startups are in a hurry to scale. Scaling refers to hiring new people, releasing new products, entering new markets, getting funded- and growing too much too soon.
In reality, 70% of the startups scale up too early and get failed.
If you do not want to get included in this list, avoid this mistake. So, take your time to settle down the things first.
Conclusion: Why Startups Fail in India?
None of us likes failure. The startup founders are always at this risk. If they do not plan their business properly, the chances of failure increase.
I hope after reading this article, you are now aware of the common mistakes that startup founders do.
If you want your startup to be successful and work in the long run, avoid these mistakes.
Do you own a startup? If you are serious about your Startup & want to run a business for a long time then you should take advice from a Startup Business Consultant.
Abaxsoft Solutions Pvt. Ltd. is a startup business consultant that provides consulting services and advice to startups & other services to companies in different industries. Abaxsoft Solutions, a consulting firm that helps startups with their business development, has been in the industry for many years now. They have helped many Startups to set up their businesses successfully and develop them to be successful ventures.
