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Five Reason of Startup Failure - Fix It Before it's too Late

In recent years India witnessed sudden jump in startup led by youngsters. It excited the whole world and even Honorable Prime Minister Mr.Modi called India as Startup India. India got the recognition worldwide by demonstrating the cutting edge service, platform, product and Application offering by the Startups.

The investor community got even more excited wherein angel investor started pouring in money with high return expectation and stopped putting money in equity market or other financial instruments. The success of few startups attracted big PE, VC and Hedge Funds from across the different geographies and invested billions of Dollars.

Startups started on the right path and when money started flowing in promoters pockets then they got distracted and started investing as angle investor in other startup to make quick money.

In my point of view, Failure of Startup happened due to five important misStep and those are as follows

Targeted Segment - Startups started developing the product in one or another segment without doing the proper market validation. In India, its very common for the user to use the product out of curiosity. Startups failed to do the market sizing correctly and kept the single line of focus. Any target segment gets constituted of 7C's and most of the startups dont even know those C's.

Conceptualization - In the world of mobility, it is important that development team should have indepth knowledge of E2E ecosystem. Startups kept their focus on Client side supported by simple Server side configuration. Post analyzing many failed Startups, I came to the conclusion that they just wanted an applications so that they go market immediately. They failed to understand that Conceptualization of any product is nothing but 4P's and they were not aware of it.

Consumer - Indian consumers are very dynamic in nature and make perceptions within seconds. Many startups failed to take the input from common consumers about their concept. They never visited different location of consumer assembly point to check their preference.

Commerce - Most of the startup thought that they will first give the service for free then they will monetize that. In order to acquire user, they went to online to OEM embedding route without knowing consumer preference. That led to a situation wherein they achieved 10 to 15% retention % of user and at the end their cost of per user acquisition went too high. As number of user went down dramatically, startups failed to implement their business model. Many of the Startup had business case which were imaginary one.

Financial Stability - Post receiving the funding most of the startup started spending lavishly on office to parties and on user acquisition. It increased their Opex and they ran out of finance which led them to situation where they were forced to fire people which impacted their product development
In my point of view, the remaining startup should do market research and adoption test by talking with potential customer and accordingly refine, define their product line. If one do's so then only they will be able to tide over the downturn otherwise they are bound to be tossed up.

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About Devendra Prasad

20 years plus industry veteran of domestic and international ICT domain with the expertise in Business, Technology, Strategy and Analysis. Specializes in forecasting impact analysis, trends and recommendations for Investments, Technology and Regulations.
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