“77% of the venture capitalists surveyed stated that a primary factor contributing to the failure of startups was a lack of innovation, which they defined as the development of novel technology or distinctive business models.”
-Economic survey 2021-2022.
Even though it has the third-largest startup environment, between 80% and 90% of Indian enterprises fail within the first five years of existence. Wondering why so many startups fail. We uncovered some of the key causes of the issue, along with strategies for how startup founders might get over the obstacles we found themselves up against.
A lack of original thought
According to the survey, 77% of VCs think that Indian startups don’t have enough unique ideas or approaches to the market. Study results from the IBM Institute for Business Value show that a lack of innovation is the primary cause of the failure of 91% of startups within the first five years.
India may boast the third-largest startup environment, but the country is notably devoid of any industry-defining “meta-level” startups like Google, Facebook, or Twitter. Furthermore, Indian businesses are sometimes criticised for failing to create their own startup paradigms in favour of emulating the practices of thriving international corporations.
According to a ranking of the world’s 50 most innovative companies, four Indian startups—ChaiPoint, Ola, Saathi, and Swiggy—are among the most forward-thinking in the world. Swiggy is also on this list.
A lack of funding
Tazzo, a company that rented bicycles, ceased operations in 2018. One of its investors claims that the company’s poor product-market fit was responsible for its inability to raise capital. The venture had raised a substantial amount of funding, but it was forced to shut down since it was unable to build a profitable business plan.
There is no shortage of potential company concepts waiting to be implemented. However, money is needed to make concepts actual. Those who are able to get capital will need to have scalable and profitable business strategies if they want to see their firms prosper. Lack of capital is a major contributor to the failure of new firms.
Lack of initial funding is a major contributor to the failure of many startups. Failure to successfully seek extra finance is a leading cause of business failure, even for those entrepreneurs who are able to secure startup funding.
Product-market fit at its finest.
A primary reason why many startups fail is that consumers have no interest in the products or services being offered. To what extent do purchasers benefit from your product? Is there a demand for what you’re selling?
Does your product’s concept reflect the innovative tenets upon which your company was founded? Many startups either rapidly develop items for which there is no market, or else try to expand the customer base for an already established product.
At home and in the office, people are constantly plugged into the web. Constant adaptability to new challenges and situations is essential. Start-ups may have an advantage in this market if they can prove to be quick on their feet.
In 2015, Hindustan Unilever Limited, India’s largest producer of consumer goods, decided to form partnerships with other companies. The reasoning behind their actions may come as a shock to you. To be more nimble, they engaged in this practice. The shift helped the company adopt the kind of flexible, can-do attitude that is often held to be a hallmark of prosperous businesses.
Most startups experience some form of initial growing pains. Further, they are constantly met with challenges to which they must seek solutions. Since change is inevitable, a new company’s ability to adapt quickly to changing circumstances is crucial to its success.
Not caring about the needs of the clientele
In the early stages of a company’s existence, its founders are tasked with a wide range of duties, including but not limited to: marketing, fundraising, hiring, and general management. Perhaps customer service isn’t even a consideration for them. This is a major problem that startup founders may not see, and it may be the reason their company fails.
Research published in the Harvard Business Review found that new enterprises benefited from customer-centricity when they simplified the decision-making process, zeroed down on a specific niche, and gained traction through positive word of mouth. Additionally, consumers know what they want and can provide useful input to help businesses enhance their offerings.
These have been the primary factors contributing to the rapid demise of new businesses. These are the only primary reasons that come to mind, but there are many others. Despite their seeming insignificance, the details play a significant role in the failure of the idea.
The Indian startup ecosystem has received significant support from Indiasoft, which is the world’s largest IT summit, as well as foreign exhibitions and conferences. Indiasoft has been a significant contributor to the growth of the Indian startup scene ever since the company was founded in 2001. Indiasoft has been working hard to fill in all of the gaps and make it possible for any startup founder to get to their target. You can secure funding from Indiasoft by ensuring that all of the gaps are filled. You need not go any farther. Make the decision to use Indiasoft to put your concept on the world map.