Top 10 Reasons Technology Startups Fail Before 5 Years

Owning a start-up has become the trend in many countries of the world. Check in the internet and you find numerous ventures making headlines in the metropolitan cities.

As a human being you normally become happy about a start-up being picked for investment by a Silicon Valley company, but how many of them really succeed? In a startling reality, it is a fact that nearly eighty percent of start-ups fail within the first three years.

Very rarely, does a start-up cross half-the-decade mark.

In this article, given are the ten reasons why tech start-ups fail to go beyond five years. But when every point in the article is taken to consideration, then every start-up from home electronic appliance repair companies to software service organizations will definitely succeed to make a mark in the business world.

1. Wrong Product

If the tech start-up has built a product without remaining in contact with the potential customers, then it is a bad business move. In similar situations, the result may be loss of time, money, resources leading to closure of the company.

It is advisable to build a product that solves the main problem instead of focusing on many trifle problems.

A fact to be addressed carefully, the start-up team should be in constant touch with the position of the market. Failure to recognize the market trend and business patterns can make a huge difference in the pricing of the product.

Wrong Product

It is advisable to design a product that gets instant response from the customers. Your product should not be too far of the present trend.

Kindly note, it is very difficult to get the product right at the first time. There are chances that the design will take one to two revisions. In similar situations, the top management should keep its cool and constantly motivate the junior members. Failure on this part may lead to disinterest among the team members and loss to the company.

2. Right Team & Team Enthusiasm

It is better to hire a team which shows passion for their work. The main reason, long hours and work patterns go beyond job descriptions. A team which is not lauded commended very soon leaves the company. Remember the proverb, employees run away from people not organizations.

Right Team

For example, the CEO has got a good idea and has put a team to design the product. But the investors are in a hurry to release the product to the world. In similar situations, when the product is not completed, team members tend to lose interest in the product or never give their best after the release. In similar situation, unless the management takes control, there can be chances of resignations on a large scale.

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The CEO of the software start-up has the money but he/she does not have knowledge of coding. In similar situations, the CEO has to have a very good relationship with the coding team. In short, it is better to start a company where you know the tricks of the trade.

3. Lack of Value

If the product fails to live up to the expectations posed by similar products, then the company is bound to close its shutters soon. It is mandatory that the product has at least four unique value propositions that can give competitive advantages over its businesses’ rival tools or products.

Lack of value

It is necessary to note, that the success of a product begins and ends with retaining the customers. Many of the management in tech start-ups believe a good product with a flashy website will always retain the customers. Acquiring a customer for less money and retaining the customer can cost a company millions of dollars. Also, it is necessary to keep upgrading the product as per the technology trend in versions. Remember, the Apple iPhone.

The first model iPhone was released in 2007, now the product has released its last version, iPhone X.

4. Persistence and Consistence

There are good times and then there will be few bad times. Bad times may question the faith of a founder in their business venture or product.

Persistence and Consistence

One-time success will not withstand a lifetime. To ensure success, proper management is needed. For a start-up, professionals with years of experience and knowledge are needed for project and people management, and to focus on the company’s vision and mission statement. Failure to have an experienced professional at the top management will have severe repercussions.

5. Mentors/Advisors

It is better to face the world with an experienced professional who has relevant experience or have walked the path. You will have few chances of making mistakes. They will always make you stick to the perfect business plan.

Mentors

The mission and vision should be clear or else, there will be long time delay in project execution and the start-up will be doomed to failure. As a start-up, your mission and purpose must be clear.

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There are companies which have hit the ceiling in the initial stage, but nosedived because the CEO did not have an advisor team. Proper advice at the right time and steering the team towards the goal can only be possible under the guidance of a mentor.

6. Not on Time

Every idea becomes a waste when it is not executed on time. The investors can also lose interest or the same idea may be envisioned by others to start a company. Having the launch at the perfect time will leave you far ahead of the competition. Delaying the launch can make you fall behind the competitors and your product will be buried in the heap of new releases.

Not on time

A proper release strategy and advertising pattern is mandatory to make an impact on the market.

7. Success of Product

Many a time, a start-up founder dreams of designing a product or tool which can be shown to the world, and wait for the investors to fill the coffers. However, time is required to approach the investors, convey the idea and wait for the investment.

Success of product

In case of a low financial budget, experts opine not to start a company until you have potential investors backing your product.

8. Feedback

There are many stories abound of how start-up founders refuse to release or let the public know of the product unless it is designed and tested for perfection. The main reason – they get afraid that the idea will be stolen. Yet, it is necessary to advertise and get feedback on the product.

Feedback

You can solve the problem by designing an inexpensive model of your product and getting feedback from mentors and public. If you need more time to find the investors, then it will be difficult to cover the daily expenses of the company.

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9. Money

Do not start a company if the sole aim is to make loads of money. For a start-up to be successful, you as well the team has to put in more than 80 hours per week.

The other fact should also be clear. If you do not take care of the pennies, then you will definitely lose pounds. Usually, if you are an engineer who is an expert at design but worse in maths and accounting, enlist the assistance of a family member to keep the company expenses on a tight budget. In opposite cases, the cash burn will happen, and at the last stage all the company employees will be forced to look for greener pastures.

The CEO should know the exact time to hire the relevant professionals for the company. It is no use hiring marketing representatives when the product is in its nascent stage. On the other hand, it is vital to hire experienced representatives when the product is to be released in the market at a short notice.

Money

Financial planning is a harsh word. But money is the major reason why many tech start-ups go on the path of failure. No knowledge of pricing the product, fixing to a perfect budget and mismanagement of funds may drain the company of money.

10. Capital Funding

Be ready to encounter failure, there are chances that your product may be rejected a hundred times. So it is vital that a business plan is in place. If the management team starts the investment search after a long time, goes after the wrong investors and if the business idea is not presented in a suitable format, there are chances that your company will be strapped of cash.

Capital Funding

Start-ups that fail to get the required funding at the right time face the risk of becoming invisible to the public eye.

Many of the founders start a company accounting for the development costs, and assume that the cash will flow once the product is completed. They do not understand that the public will take some time to first get information on the product. In case of a novice brand name, the public will take more time to place trust in the product.

To escape from the pitfall, every tech start-up company needs to have a proper company culture. The management team should make every effort to facilitate foster talent and create an environment to prepare the best team. With a proper management and business plan, every tech startup will be a success provided they do not commit the above mentioned mistakes.

Have you read the article? Thank you.  Please note, a business survey quotes that there are at least a million persons who want to try their luck by starting a company. The truth is only five percent make it. Out of the same, only a fraction of the start-ups go on to become successful after the first half-decade. At present, the doorstep service companies in Bangalore and other cities are ruling the roost.

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