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WHY Startups Fail in India?

By RaiseMyStartup


Published on September 6,2017

The failing-startup problem in India has become a big issue in the startup ecosystem. It seems every other person (specially if you have the Holy Grail of an IIT and IIM label) has a billion-dollar start-up idea and promises to change the world. But often forgotten that anywhere between 6-7 of every 10 startups will fail, some in fact argue failure rate is as high as 90%. Ninety percent! Neil Patel writes in #Forbes.

Startup founders dream of becoming the next Airbnb or Uber, but the harsh reality is that most startups don’t end with a success story. The silver lining is that failed startups serve as cautionary tales for entrepreneurs. Much can be learned from why others didn’t succeed.


There are several issues that could eventually lead to the closure of ambitious business models, but lets focus only on IDEA and PRODUCT MARKET.

  • Scarcity Of Crisp And Innovative Ideas: Almost every niche market in India is suffocated with multiple startups trying to provide solutions to the same problem. This calls for entrepreneurs to be inventive and push the boundaries using innovation to stand out. Due to competition, the urge to grab market share makes an entrepreneur vulnerable to mistakes by producing the wrong product.

Few graduates of IIT-Delhi decided to launch their own technical startup based on the idea- ‘Exploiting the mobile phone and using it as a remote control to open a car, turning the ACs on and off, turning the geysers off and changing the TV channels.’ However, success seemed to elude them. They failed to gain enough traction and hence they did away with the startup. The reasons for not getting enough traction are simple- Most people have no problem in spending a little on a remote that can operate TV and AC. Also, the battery of smart phones has to be charged frequently. If the battery dies, operating TVs and ACs becomes difficult.

  • Insufficient Market Expertise: Startups also fail because they lack an understanding of the market. For example, a company can perhaps does not have a compelling enough value proposition to convince the consumer to purchase its product or service. Maybe for a company, the market timing is off – it is possible you are ahead of the market by a few years and they are not ready for it yet.

Market research is the first thing any startup must do before starting up. Research might lead to believe your product can be tweaked to match the market requirements, or be presented in a different way, or even marketed in a specific manner. Market research prior to launch, or even launch planning, is a crucial step that can help you avoid many mistakes.

This is also the only way you can avoid entering a marketing which has no, or little, potential for growth. For founders who come across this problem in their market research, the best thing to do is re-assess the product, and re-vamp is for a different market.

  • Inadequate To Compete With Market Leader: While it’s nice to get inspired from success stories, Indian entrepreneurs are often carried away with success stories, so much so that they end up aping existing models. Companies like Uber, Ola, Flipkart, Oyo Rooms aced in the race of market share, leaving no room left for industry peers to battle it out.
  • Unaware Of Dynamic Market: Market dynamics keep changing with new trends becoming outdated in no time. Before a startup knows what hit them, it is often too late to react and change the strategy. Such scenarios arise when a startup’s core team is unable to make timely decisions due to lack of industry insight, not conducting thorough research about the niche market, targeting a wide market segment, and more.
  • Unrealistic Business Plan And Business Model: Many startups fail because they don’t have any pragmatic business plan and a feasible business model. It is impossible to any startups to exude a striking sense of satisfaction. It is extremely difficult to tread the path of success without a business plan. By having a business model and a complementing business plan, one can focus on long term goals and immediate objectives.

Beyond the idea, there are more practical reasons startups fail. Lack of sufficient capital (29%), the assembly of the wrong team for the project (23%), and superior competition (19%) as top reasons for failure.


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