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Why are Tech Startups Failing? I Give You 6 Critical Reasons

Why are Tech Startups Failing? I Give You 6 Critical Reasons
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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Take a look at these names…

  • Dazo
  • Spoonjoy
  • TalentPad
  • TaxiForSure
  • Jewelskart
  • Fashionara
  • ITiffin

What’s the common thread that links these names? While these start-ups started off with huge investments being poured in for them to thrive, they failed to make a mark in today’s highly competitive market. As India witnesses a sudden surge in the number of start-ups, here are some numbers to prove my statement - 2281 start-ups have cropped up since 2014 across verticals, the harsh fact that 9 out of 10 startups fail cannot be refuted. From lack of product to market fit to disharmony within the team and founding members, Dr Som Singh, mentor, advisor and entrepreneur provides a post-mortem on why tech start-ups are faltering on their way up the ladder.

1. Ineptitude

Just because you have an idea in mind doesn’t mean you can build a business empire around it right? Is just the idea really enough? A few of the primary reasons why startups bleed out is incompetence to…

  • Identify if the idea is market worthy
  • Carry out sufficient competitive analysis of the industry
  • Analyze if the product/service they are looking to offer is exclusive
  • Identify a value bracket
  • Categorize budget restraint and why it’s crucial to stick to the resources at hand

Additionally having ineffectual inexperienced employees on board and operational mismanagement drains venture capital while also exhausting revenue.

2. Lack of administrative experience

Not every idea gives you ‘Eureka!’.  Proper management is key and that management requires experience. Successful leaders have honed their skills over years after incessant practice. Some of the challenges in which experience is required are project and personnel management, crafting and executing a company's mission and vision, and implementation of a company's strategy. Weak teams add very little value to the company and are usually the ones who could ruin the company. Lack of innovative ideas and thus not being able to provide an exclusive niche product in an already over-crowded market also leads to collapse. A good management team is clever to discover tactics that ensure a company’s success in the market place.

3. Marketplace Deterioration

The industry is moving at a rapid pace. What is ‘in’ at the moment may be out-of-date in no time. This is the very reason why tech products have a very short lifespan, may be even much shorter than the time it had taken to establish the product from ground up. Many tech start-ups see that the time they take to ideate on their plan, get suitable funding and start their business, they are already irrelevant or by now have some rough competition.

4. Poor IT infrastructure

When it comes to a technology company, it cannot survive without an excellent IT set up and support system. Start-ups need entire infrastructure built on powerful servers, networks, computers and workstations for employees. The technical dexterity required to set up such systems is exceedingly sophisticated thus it has been seen that successful start-ups often outsource certain sections of their work.

5. Inadequate marketing

You need to be aware of the fact that it pays to pay attention to your customers and for that you need a proper marketing and communication strategy. As a startup, there are more than a few cost effective marketing tactics that can get the word about your business out in the market.

6. Diminished Finances And Poor Cash Flow

“Cash is king”

Dearth of funds is one of the nastiest things that can happen to a startup. Most start-ups run out of cash as soon as they commence and bump into complexities in finding further funding. Archetypal causes why companies run out of money comprise inadequate administration, deficiency in sales and revenues, scanty finances, etc.

The tech industry is undoubtedly one of the hardest nuts to crack. So, if you are planning to start out, make sure you bear these points in mind and then take the leap. 

Edition: December 2016

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