1. Failure to create a market
Gone are the days when MR= MC was the ‘only' business strategy to sustain in the market.
Sometimes the startups fail to create a market or consumer drive to purchase their product.
One reason might be the focus on generating profits rather than enhancing the market size. They may not be able to create compelling enough value propositions, or compelling event, to cause the buyer to actually commit to purchasing.
Secondly, sometimes the market size for the product is simply not large enough.
Lastly, the startup may enter the market in the wrong time; either too early or too late.
2. Product problems
Another reason that companies fail is that they fail to develop a product that meets the market need. This could be due to strategic problems or failed geographic expansion.
To sustain the startup the product should not only cater to the needs of the customers but also it should also focus on the customers who acquire a taste of it over time.
For this, up gradation of the product over time with regard to market demand and requirement is must.
3. Poor management
The entrepreneur finds it difficult to organize the management unit efficiently. The managing team is often weak on strategy; building a product that no-one wants to buy as they failed to do enough work to validate the ideas before and during development.
Moreover, sometimes the managers are a poor controller of the startup and less willing to contribute in prospering the business. This further weakens the lower sections/ departments of the enterprise.
4. Lack of capital and investment
One of the reasons behind the failure of startups is they ran out of cash. The primary reason behind this is that banks are reluctant to lend to startups.
Also, venture capitals prefer investing in a limited number of startups to prevent themselves from losses. In other cases, if a business has scaled well, but needs additional funding to further accelerate expansion they fail to generate enough investments from external sources due to lack of familiarity in the market.
5. Failure of business model
Sometimes entrepreneurs fail to create an adequate business model on the extremely optimism based assumption that customers will beat a path to their door. But it becomes an expensive task for many of them to win customers and eventually, it increases the cost of acquiring the customers.
So it is mandatory to monetize beforehand a strategic way to acquire customers at a significantly higher level to outdo the cost of acquisition.
6. Inadequate marketing
“Jo dikhta hai vhi bikta hai”. Startups fail to realize this old adage.
Insufficient and inadequate marketing is a common failure among startups.An anticipation of the target audience and the ability to convert potential customers into leads is one of the prerequisite for a successful startup. Many startups fail to materialize this due to insufficient funds and unwillingness.
7. Fails to create network
Apart from poor marketing, lack of network with investors and other stakeholders impede startup growth. Entrepreneurs often fails to utilize their network for the growth of the startup.
In addition, rather than exploring the prospective networks they become prey to asymmetric information regarding their networks.