Why do startups fail?


A start-up in essence, is a business experimentwith potential. Founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand these companies typically lack a fully developed business model and, more crucially, lack adequate capital to move onto the next phase of business. These companies generally start with high costs and limited revenue, which is why they look for capital from a variety of sources such as venture capitalists.

In recent years, startups have been receiving increased attention in many parts of the world. In India, the number of startups has increased fast and more support has become available in all dimensions. India now has the world’s third largest startup ecosystem after the US and China, according to the Economic Survey 2021-22 released by the Indian government in January 2022. With the phenomenal growth of startups in the country, the Government of India established Startup  India in 2016 as an initiative to support entrepreneurs and strengthen the already thriving startup 

ecosystem.The Startup India initiative aims to assist entrepreneurs by making it easier to start a business, gain access to funds, and streamline other growth factors important for early-stage companies.

There are relaxed norms, tax exemptions easy exit options, cheaper patent cost and several funding options for start-ups that register under startup india.

Even with positive support atmosphere statistically a great proportion of start-ups tend to fail. By its essence start-ups are not any new business. They are innovative ideas with a potential for expontential growth. They are basically testing an assumption and thus there is an inherent risk in it and when you put this new kind of risk on top of the traditional risks of starting a business (finance/cash flow risks, operational risks, team risks, marketing risks, etc.), the chances of a startup to fail increases. A number of reasons are stated for the start-ups to fail and some of them are mentioned below.

1. Market conditions: a good grip over the need of the market is essential for any business to workout. Also the market conditions always tends to keep changing and ones business need to keep changing with it. You should be ready and equipped to make changes according to the market needs. An unexpected market crisis also often becomes the villain in the story.

2. Cash flow issues: Another reason for startup failure is simply running out of money. Most startups rely on investors and venture capitalists to fund them until their product or service starts making money, and if that doesn’t happen fast enough, investors often pull back from spending more. If they are not being able to find a new money source and make the project profitable the startup will have an early death.

3.  Flawed business plan: Having a business plan is the first step of the startup. But not all plans are good enough. A flawed business plan doesn’t take into account factors that later become important, and can cause business failure rather than startup success. Some common business plan flaws include being too vague, miscalculating costs, underestimating timelines for production or marketing, and getting key facts wrong when researching the market, as stated above.

The start-ups are most often the brain child of people who had great dreams about it. Failing at that is a disastrous situation. Good financial analytical skills and expert hand holding might have saved many brilliant ideas that took the wrong step. In this age of financial boom we need more expert financial brains that can solve such disasters. US CMA & US CPA produce such brilliant minds who can aid such brilliant ideas with the current financial ideas. At FINSPIRE Academy, our team of transformation catalysts provides you with the finest tools and advice for clearing the US CMA and CPA exams. With more than 30 years of aggregate expertise in coaching and mentoring and its exceptional online interactive lessons, we assure to inspire you to achieve success.

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