Site icon Pratik Ratnaparkhi

Why do startups fail?

Some startups succeed, and some startups fail. It’s a cycle that keeps going on. If there is sunrise, there is sunset. If there is Summer, there will be winter. If there is a low point, there will be a high point as well. Once you have been bitten by the entrepreneurial bug, you are a part of this cycle of success and failure. I have been through this, I have succeeded at some, I have failed miserably at the others. But it’s always the failure that teaches you something, success just adds to your ego. I have been lucky to see more failure than success.
I have worked at/with a lot of startups and have seen a pattern in them. I decided to note down all these points and figure out what are the reasons a startup fails and what’s the best ways to avoid it.

1. Founders

The major reason any startup would fail is the founders. A founder is like the captain of the ship, he has to take all the decisions, and no matter how crazy it is, the crew follows him. Even Jack Sparrow was an eccentric captain, his crew followed his crazy ideas, and yet he was successful all the time!
I have seen companies that have folded within years of starting up because the founders were spineless. They had no vision, the started up just to make $$$. I feel money is the by-product, start to solve something, not to make money. I have seen founders who are clueless and visionless. They have no clue what needs to be done, and they look out for answers, try to copy others, and eventually fail.
The founders should be the driving force of any company. They should be the first to come in and the last to leave. I have seen people starting up to solve a problem alright, the issue of them not having money in the bank.

2. Team

I have seen every VC ask this during fundraising, “Tell me about the team”. There must be a good reason why they ask this, and there is! A company is as good as the employees working there! At a startup, they are the ones who will build this into a business.
Almost every startup does this mistake, they don’t care much about their team. Founders think if they are paying you, they practically own you. Let me make it clear that you can build a business by putting in 8–9 hours a day, there is no need to make your employees work for 12–18 hours a day. If your employees are working that much, please learn time management. You don’t need more than 6–7 hours of dedicated work to get things done!

3. Culture

I understand that when your team is small you don’t have much time to focus on the culture of your company.


Culture is what keeps your employee to stick around during the hard times. If you are bootstrapped, but every now and then you do small things to keep the morale of the company high, it rubs off on your employee. It could be the smallest of things like buying them food on any of the weekdays, allowing people to take the weekend off ( Trust me I have seen a majority of the companies working on all 7 days of the week, and it’s not a good practice.)

A startup that I’m mentoring has decided to give 5 days off for every female employee during their time of the month! I mean how considerate is that?

I have seen companies where the founders just want people to work and in return, there is no gratitude. Of course, your team is not going to stick with you for long.

Have a culture in place, invest in your culture and you will reap dividends later. It’s an investment, not an expense.

Take a day in the week to blow off the steam, you don’t have to spend lavishly. Just sit with your employees and discuss things other than work. A lot of such sessions end up giving ideas that could do wonders for you.

4. Product-Market Fit

A lot of startups fail because they think the idea that they have is groundbreaking because it is solving a problem for 5 people.

You can’t make a company just because 5 people told you that it might work.

You need to study the market before you all out with your product. You need to think about the users of your product.

If there is no market for your product, who are you selling it to then?

5. Failure to foresee the future

Scaling at the right moment is the key for any startup that wants to grow.

I have been a part of a startup that lost the plot because they just didn’t see the trends changing. They had the chance to educate people and users about the niche they are in, but they never put enough thought into it.

Oyo changed the way we book hotel rooms. Byjus changed the way we perceive education. Khan academy changed the landscape of online courses.

They did it because they saw an opportunity in educating the masses about what they are doing. Sure it takes time, but in the end, it’s worth it.

How to avoid them?

How do you avoid these 5 points that are listed above? Here are the stepping stones to making sure to avoid them.

1. Founders need to be passionate.
Come early and leave late. They should be the driving force of the company and not enjoy life just cause they have a team working 24X7 to make their dream a reality.

2. The team should be right, You need to hire slowly and fire fast.
It makes no sense of having someone who is not adding value to your company just stick around and leach off of you.

3. Office culture should boosts morale and people should feel like coming to the office.
It shouldn’t be the other way around. Get a culture going with your company. Have fun days, and encourage your team to work on their own mini-projects. That’s how Google came up with a lot of its products.

4. Good product? But there is no one in the market to buy, how is that useful?

Be thorough with your market research. Do surveys, and see if there is a demand for your solution. See if people will buy it in the first place. If yes, then go ahead and build it!

5. Be active!

That’s it. Have an eye on the market trends, pick them up, and start working on them. Be wary of what your competition is up to. It’s perfectly fine to follow them and spy on them. Cut the BS and focus on the end game.

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