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Success and Failures

These Are the Major Reasons a Start-up Fails Believe Investors

Before entering an industry, it is critical that the founder evaluates the segment and understands it completely
These Are the Major Reasons a Start-up Fails Believe Investors
Image credit: Shutterstock
Entrepreneur Staff
Senior Correspondent, Entrepreneur India
3 min read

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

While there are many start-ups cropping up in various industries and segments across India, not all of the ideas meet with success. Some of them fail to make their mark in the ecosystem, some which are heavily funded while others which faded out as they reached out to the investor table.

There are many factors that lead to a start-up's death and investors while evaluating one know exactly the reasons why a start-up can't succeed. Entrepreneur India spoke to investors who listed out the factors that often lead to a start-up's failure.

Not Assessing the Environment

Before entering an industry, it is critical that the founder evaluates the segment and understands it completely. Srikanth Sundararajan, General Partner, VentureEast believes that one of the biggest reasons of failure is that the leadership of a start-up is not aware of the environment, macro and micro competition. "The executive needs to be on constant vigil and ensure pragmatic measures are being undertaken," he said.

He added that the focus of a founder should always be on the building value in the business ethically, without rushing into making decisions. The trick lies in not blinding competition or cutting corners.

Agreeing with Sundararajan, Aditya Awasthee, Angel Investor and founder of NeXus Circle believes that the lack of a product-market fix is another reason why start-ups fail to prosper. "There will ultimately be no paying customers or a fragmented demand for them," he said.

Get Your Ethics Right

For an entrepreneur, it is important to have their values in place which they can further instil within their employees. If the founder lacks certain values, it will automatically reflect in the company's culture. This will also lead to boardroom and co-founder conflicts believes Awasthee.

It all boils down to the entrepreneur and the way he/she runs the business. "The entrepreneur should focus on intellectual honesty and ethics. If these are present, and the venture is focused on providing real value, everything falls into place, including the team building as well as the right investors; the entrepreneur(s) is the key driver here," said Sundararajan.

Investors Don't Drive a Business

A lot of start-ups die because of lack of funds. As soon as the idea and team is in place, founders rush to find investors who will fund their project. But relying on investors will not help an entrepreneur. Awasthee said that for the investor, it won't be his/her core business, so they can't drive it. "Another reason is the lack in access to resources (not just capital). This is essentially due to lack of information sharing at a single point," he said.

Don't Ape Western Start-ups

The me-too phenomena in the Indian startup ecosystem will not help it grow. A lot of Indian start-ups started off by borrowing an idea from the West. However, fitting the same in the Indian context doesn't work always. One has to adapt the product or idea according to Indian needs, believes Shivam Ahuja, founder, Delhi Angels. "Start-ups have great technology, expertise and advisors, etc, but what we they don't have is technology or business model that solves a pain point in a scalable way. We have different problems, solutions are meant to come the Indian way with a scalable technology and business model," he said.

Opinions expressed by Entrepreneur contributors are their own.

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