In this article, I will try to tell what I have seen in 16 years of experience working with more than 30 startups and how to create a large and successful project. Before we talk about success, let’s talk about the reasons why startups fail so that we can avoid them and thus increase our chances of startup success.
No Need in the Market (42%)
The main problem here is that the entrepreneur sees the world through his own prism of perception and is sure that he is right. Accordingly, he often runs after an idea, blindly believing in it and not looking around, that is as if making a project not for end-users, but rather for himself.
This problem can take a very different form: this is a fundamentally wrong idea, and the lack of research at the start, and an attempt to make the most sophisticated product, which leads to its excessive complexity and rejection on the market, and development for such a long time that the market changes and the product becomes unclaimed even before its release.
I often see entrepreneurs make this mistake over and over again as I develop and promote bespoke and work with these entrepreneurs on a daily basis. First, an entrepreneur comes to us as an expert with unique knowledge and asks to turn his idea into a project – and ends with the words: “I’m a customer, do as I want.”
Often we are forced to build another “spaceship”, the development of which is delayed for years. The project either never ends, or is out of date. And this is not to mention more banal cases when an entrepreneur does not even know that people are already working on such ideas in the market for a long time. This is one of the reasons that the startups fail.
Run Out of Money (29%)
Have you often seen new projects in which extra money was left at the start? I think this is very rare. The budget must be taken with a margin.
I have seen more than once how huge projects were created, for the implementation of which there was no money, and they were closed. The idea that investments are easy to find is a myth. At best, you can find a very small amount for a significant stake in the company, and this money, most likely, will not be enough anyway.
Spending money right and left at the very beginning of a project is a common misfortune. For some reason, few people follow the principle of a “lean start-up”. Excessive savings, however, also does not lead to the desired result. I’ve seen countless cases of startups trying to skimp on things they didn’t need to skimp on. The cost of an hour for different specialists can differ at times, and the quality can be increased or enhanced dozens of times.
Wrong Team (23%)
Online projects require highly skilled professionals, so skilled people are the key here. In general, I would put the team first, because the right people can handle almost any problem.
I have seen many times how people were chosen in terms of the price of their work, and not in terms of competencies. I’m not saying that you need to choose the most expensive ones, no. You need to choose the most competent in a specific narrow topic, and if you’re lucky and there will be two or more competent profiles to choose from, then you can choose by secondary parameters, including price.
Often you need not one specialist, but a whole team of specialists in a narrow field. Then the problem with the team turns out to be even more acute, because there are very few high-quality specialized teams, and building a team from scratch is a time-taking process. Outsourcing the areas like social media marketing, digital marketing, SEO, App Development, Website Design & Development, Content writing, etc., to a competent digital marketing agency may save you time, energy, and money.
The key to a successful team is a triangle: a great manager, a great salesman, and a great techie. It is better to keep these people in the state, and the rest can be outsourced. Considering the importance and value of money in any economic activity you understand that it is a reason that startups fail.
Competition (19%)
The market has long been saturated, there are very few free niches left. First, you need to see if there are projects with a similar idea: if there are, it will be extremely difficult to get a market share for a new entrant. I have often seen people start making copies of successful products. This is a very bad idea, almost doomed to fail. If you make a product with a similar idea, then you need a very good budget for implementation and marketing. Also, you need to think about how your product differs and how it can differentiate itself from competitors.
Often people make a product without taking into account the capabilities of major market players. Make additions to existing ideas as side services. This is also a very slippery path: an existing project has the users and resources to quickly implement a similar auxiliary service within its product.
When starting a project, you need to devote quite a lot of time to researching competitors and the market.
Pricing Policy (18%)
This problem originates in ignorance of the market and consumers. It is possible to invest millions of dollars in useful service, but the value of the product may be lower than its cost – therefore, at this price, no one will buy it, and at a lower price, it will not pay off.
It rarely happens that the team does not conduct research on what price competitors are selling at, and the project does not enter the market by price – although there are plenty of pricing methodologies in the modern world.
Unfriendly Product (17%)
It is an obvious problem when they save on the UX and UI stage, they start with design or even with programming. I have seen entire social networks that were programmed from scratch and had no design at all. These are hundreds of thousands of dollars thrown to the wind. In 14 years, I have not yet seen a successful product that managed to do without the interface design phase. Of course, “there is no technical task in a startup”, but even when working on flexible methodologies, you need to perfect your design. Keep in mind that both UX and UI are important for both websites and mobile applications.
It also happens that the interface itself is normal, but lacks functionality. You should always make an MVP, but you should not go too far and get rid of vital functions.
No Business Model (17%)
Sounds weird? Nevertheless, this is a reality: at first, many startups do not think about how they will earn, who and how much they will pay, and what exactly to pay for. This is the so-called customer development stage. They make a startup for the sake of a startup.
At the first stage of work, we try to work out this issue, although here you need the expertise of people who have already launched a few projects, and preferably more than one, and they understand how to monetize them. Many startups think that you first need to launch a project, and only then it will be clear how to make money from it. This is a mistake, you need to think about money before you even launch. This is another good reason for startups fail.
Weak or No Marketing Plan (14%)
Most entrepreneurs think that they can do the marketing of their startup themselves or ask a friend to help them do it. But, that’s a mistake when they don’t calculate marketing costs in their budget or try to save money on marketing. In a good way, marketing costs should exceed development costs by several times. In reality, most startups consider future development costs and do not consider marketing costs. For some reason, they are sure that the main thing is to launch the project, and if the product is cool, then it will not need to be sold and promoted. History knows cases when a product promoted itself, but these are exceptions to the rule, and all of them are associated with innovative products that did not have strong competitors.
Any startup should have a marketing plan and cost estimates. It will be adjusted and probably more than once, but you need to get an idea of the channels and costs as early as possible.
I have seen many startups launching in competitive markets with little or no marketing investment resulting in very poor results. No less often, I meet innovators who did something unique and new, hoping that the product would be interesting and understandable to everyone. The market doesn’t work that way. Most often, innovative ideas need to literally create a market.
Customer Feedback is Ignored (14%)
This is a double-edged sword. On the one hand, it is important to constantly collect and process feedback from users. On the other hand, users do not always know what is best and do not even always understand what they really want. But the fact that feedback needs to be purposefully collected is for sure.
Next, you need to test the changes and do as many iterations as possible. The more iterations and the faster they are implemented, the more successful the product and the faster it grows. Although it is worth recalling the words of the history here: “If Henry Ford listened only to users, he would have grown faster breeds of horses.”
Bad Timing to Launch (13%)
The product may come out either too early or too late. I often saw the second option, when startups wait for a long time to launch their product for so long, by the time they launch the market simply changed, competitors appeared, the user needs changed.
It rarely happens that development is too fast and the market is not yet ready for the product. Either the user has not yet changed their habits, the technologies are too innovative, or there is not enough technical basis for the application. So, it is important to launch your product at the right time.
Lost Focus (13%)
The initial idea of a startup almost always changes. Often, startups even do a complete restart of projects with new ideas. And when you think over the possibilities of the project, you always want to make some secondary functions that “wouldn’t hurt”. And so a unique idea is overgrown with standard functions and lost among them.
In my experience, there was a project with a unique idea, which later acquired the functions of a regular social network, and the initial idea turned into a small block in the user’s profile. As a result, the entire project was thrown out and redone from scratch. Obviously, it again takes the effort to rebuild everything and also incurs a lot of loss in terms of money.
Disagreements with Investors or Co-founders (13%)
I see mostly the startup owner’s disagreements with the investors. A lot depends on them, so it is important to attract smart money – an investor who understands the peculiarities of startups and the market, can help with knowledge, acquaintances, and other resources. Then it will be much easier to explain something to him, especially about your startup plan.
They often attract non-core investors who have heard about the “success of Facebook” and expect quick super-profits from a startup. I have seen cases when an investor came three months after the start of the project and asked where the profit was. What happened next, when the founder replied that there was no money.
No less often there are disagreements with the co-founders of the project, when one leader wants some solutions, and the other wants others. Startup resources are always not enough, especially for the implementation of key decisions from several people at once. That is why it is important to separate responsibilities and somehow regulate relations, as well as agree on a possible exit from the project in case of disagreement. This is another reason why startups fail.
Restarting Your Project (10%)
Restarting a project does not always go smoothly and successfully. If you see that the original idea has significant problems, it is important to restart the project in time, while there are resources. And, of course, do it right. I have seen several cases of restarts where the wrong conclusions were drawn from past failures, because of which the restart itself also failed and projects died.
Lack of Passion (9%)
It happens that the idea of a startup ceases to please the creator. Either the founder has new opportunities, or the market turned out to be not as interesting as he imagined, or he simply burned out. I saw more than 10 projects that the creators just abandoned mid-way. This is another reason why startups fail.
Poor Location (9%)
It would seem that in Internet projects everything can be done remotely. But if we are, for example, in India, and we want to make a project for the USA, we need, for example:
- legal support and local registration;
- understanding the mentality and characteristics of consumers;
- accounts in local banks;
- live representatives for business meetings.
That is why American investors invest mainly in those startups whose teams are located in the United States. Moreover, in 95% of cases, the “two-hour rule” applies: the team, or at least the founder, should be no more than two hours away from the investor’s office. For the same reason, our startups, designed for distant markets, often fail. But, as far as marketing is concerned it can be outsourced to countries like India are way cheaper and better than the United States. This is another reason why startups fail.
No Interest from Investors (8%)
This most often refers to innovative ideas that no one but only the entrepreneur can understand. Investors do not give for what they do not understand. Once upon a time, the founders of Google walked around Silicon Valley and asked for a million dollars in investment, but no one gave them because they did not understand the idea of the project. In the end, one IT entrepreneur agreed to give them $100,000 under certain conditions.
I myself saw hundreds of crazy ideas for which they were looking for money, but never found it. One such idea is FlixPik. It often happens that the investors are ready to give money, but it is not enough to make the project a success. This is another reason why startups fail.
Legal Difficulties (8%)
There are often legal restrictions, be it registering patents, content copyrights, or the unconscious infringement of the rights of individual companies and the complexities involved. I’ve come across copyright infringement most of the time. For some reason, many startups do not think that every text, picture, or even idea has official owners who have taken care of protecting their rights.
Not Using the Right Channels (8%)
Not everyone knows how or wants to use their acquaintances, but a good entrepreneur must use every chance. You need to buzz the ears of all your friends, ask them to help at least with the dissemination of information and, at every opportunity, remind them about your startup. At the very least you can ask your friends to share about your startup on their social media channels so that at least their connections can know about your startup. This is another reason why startups fail.
Burnout (8%)
This is a common problem for those who work a lot. When launching a startup, everyone is on fire with the idea, they are ready to work around the clock, and this is normal. But if you do not maintain a balance, you can become depressed and abandon work. I myself had this – as a result, I went to live in the Himalayan mountains for months and recuperate.
No Pivot (7%)
Not everyone is ready to go for a significant change in their idea. Often, startups go all the way with the wrong idea — they end up running out of money, people quit, partners leave, and the startup dies. I have seen many such cases: the idea does not work, but the founder still blindly goes forward.
Conclusion
Making a successful startup is really difficult, especially in the field of online business. But still, you can significantly increase your chances if you apply simple rules and act wisely. After the startup idea, the most important thing is the right marketing. You can’t make your startup a real success without perfect marketing. This would make your business a success and won’t be added to the list of startups fail.
We can help you with your marketing in the right way. If you need our help do contact us.
