What causes startups to fail?
Reason number one: lack of talent or bad leadership. This reason is probably the most critical thing that causes startups to fail. Either the entrepreneur cannot run the business, or they don t have the leadership skills to delegate tasks to other people. Either way, they lack the discipline to make sure that the team is performing to their standards.
Reason number two: not having a sound support system. Usually, the last thing on the entrepreneur’s “to do” list is to build a good support system. While the app may be great, without the right team, it just will not be successful.
Reason number three: lousy leadership or poor management. Again, Alexander Djerassi believes that this is probably the easiest thing to fix. But unfortunately, too many times, these startups fail because there was no plan. Too many entrepreneurs started an app thinking that they would develop a large following overnight, only to find that it just did not work.
Reason number four: not preparing for the growth machine that follows an entrepreneur. As mentioned before, technology never stays static. New technologies emerge; old ones get obsolete, and old technology gets replaced by new ones. In the tech startup world, this is especially true. Entrepreneurs are usually excited about something new, but they need to think about how it will impact their business model. They also have to make plans for dealing with problems that arise as technology continues to grow.
Reason number five: bad planning or money spent on unproductive ventures. Again, this is usually the most straightforward reason to prevent startups from succeeding. Many startups want to be in specific industries. Unfortunately, they spend too much money on advertising and marketing that do not yield any results. They then become too deep in their problems and are unable to see solutions to their problems.
Reason number six: uncapitalized costs. This reason is rarely the root cause of a startup’s failure. However, it can be a fundamental reason. Entrepreneurs must spend money in advertising and promotions, but they must also have funding for operations and payroll. None of these things are cheap.
Reason number seven: lousy business models. Even if the business models are sound, there might still be significant failures because of bad leadership or business strategies. Often, a startup will choose a concept and pursue it aggressively without thinking about the market, competitors, potential customers, and the future of the business. As a result, they might spend too much money and not make enough profit.
Reason number eight: poor company growth. Just as with wrong business models, startups that don’t use proper market research quickly lose momentum. Without this, they do not have a clear direction. With no guidance, they might not know what to build, what to sell, and how to grow their business. Good companies quickly learn from their mistakes and grow. Other times, growth occurs so slowly that the company eventually fails. Alexander Djerassi has understood these reasons for many years. Having an entrepreneurial spirit, Djerassi feels these reasons are legit and straightforward.
Reason number nine: starting too small. One of the biggest reasons that startup failure happens so often is because too many new businesses start with too small a capital base. They don’t have enough money to hire employees, do marketing, or pay for office space. In addition, they usually don’t have a product to show for all of their investment.
Reason number ten: bad hires. Again, another big reason that so many startups fail is poor hiring practices. If founders can’t find qualified employees quickly, they may have trouble hiring more in the future. Even when they get people, they may not be talented enough or experienced enough to make things work. Good hiring practices help solve problems by doing background checks, interviewing, and hiring the right people for the job.
These are just a few reasons that startup failures happen so often. Of course, there are other reasons that startups fail, including problems raising capital, problems designing a good product, and poor hiring practices. Regardless of the cause of the startup failure, it’s important to keep these facts in mind as entrepreneurs seek solutions for their businesses.