Are you planning to launch your startup? The idea of not succumbing to a 9 to 6 routine and being your own boss is absolutely a tempting one. But, unfortunately, many budding entrepreneurs don't realize just what it takes to run a business – and a successful one at that. If statistics are to be believed, 90% of the startups don’t make it to their third birthdays. If you think all it takes is good funding, 75% of startups backed by venture capitalists fail. So, clearly having the capital to fund your startup is not a factor that can guarantee success always. Despite the money, there are certain blunders that these startups make which puts them in the 90% who failed.
This article touches the pain points of startups and the blunders they commit so you can know what to avoid as you plan your journey ahead.
Not Focusing On the Users
As founders, the main aim is always to give the customers a product or service they are happy with. They think of a problem and get down to making what they feel is ‘the most probable solution’. Somewhere in this quest, they become extremely attached to the product which brings in rigidity and fulfilling the user’s wants takes a backseat. The result is a product that nobody really needs.
Remember the Silicon Valley juicer startup ‘Juicero’ which raised $120 Million from investors? The tech startup offered pre-sold packets of diced vegetables and fruits that users could put into the $400 machines, which then made juice out of the contents. The company was widely mocked that the cold-press $400 juicer machines were as good as two hands squeezing a juice box. By raising huge sums of money for solutions to non-problems, Juicero became a symbol of the absurd Silicon Valley startup industry which ultimately shut down in 16 months.
Hiring the Wrong People
Bad employees can be one of the gravest startup blunders you can commit. It can sink your entire operation before you can even lift it off the ground. No matter how much you need a person to fill into the shoes for an important role, don't hire just because you ran out of patience or options. Especially since many startups begin with 3 or 4 like-minded people working for a cause, it can be a huge setback if even one of them is not on the same page. Even if one wrong person out of 3 or 4 cannot put in the same amount of dedication and countless hours to get the startup in business, it can leave the company paralysed.
A good idea is to have detailed brainstorming sessions and one-on-one discussions/interviews while building a team to select the right fit. Find out if they are a good culture fit and then conduct a technical round to gauge their professional commitment. This not only gets you the right people but also helps you enjoy the process.
Often, startups rely on fundraising efforts to kickstart their process. But, this money needs to be raised at the right time. While raising it too early can dilute your shareholding more than you planned for, raising it too late can result in missing scaling opportunities. Many business owners make the error of spending a lot to buy the best of everything as they think that increases their success rate. However, if you choose less expensive but viable options, you will be able to prevent your startup from a cash burnout.
Take the example of Purple Squirrel Adventures, a learning startup by Mumbai-based founders Sahiba Dhandhania and Aditya Gandhi that shut down abruptly. The company aimed to bridge the gap between industries and students through workshops and tours and offer professionals a deeper understanding of their future career options. Even though the company managed to raise $300,000 in two rounds of equity funding, it failed to hit its target 30 crores. In fact, at one point it was spending 1.2 crores per month.
Absence of a Growth Model
Usually, a startup is flexible and small with a manageable team with a similar mindset working towards a common goal. Sounds familiar, right? But, what happens when this imagined startup grows to 200 employees and becomes a major player in the market? Have you thought things through when you reach this stage? How will you scale up your service or product? Is it even scalable?
If you don’t have a growth model which can give you a 360-degree view of what’s happening within the startup and where it is headed, it can cause problems. As per a report, 2/3rd of full-time employees experience burnout at their jobs because of unreasonable time pressure and unmanageable workloads. You need to be able to foresee the commitment expected of you as you progress, so this stage can be prevented.
Key Performance Indicators, pivots and revenue prediction models may seem boring but they are more important than anything else. If you can identify possible pitfalls and outcomes after aligning your expansion plans with the analytic reports of your startup you can be better prepared for the long haul.
Not Launching the Product on Time
Many a time, startups wait to announce their arrival with a loud bang, for example, a grand product launch. But, what they don’t realise is the world isn’t really waiting with open arms to welcome them. The first users of any product are always going to be the teammates or your friends you pester to use the product and give you feedback. An early launch means you can get the feedback sooner and work on iterations to incorporate the suggestions coming your way if it helps to make the product better.
Take the VR platform, Vreal's, case. The company raised almost $12 million in its 2018 Series A and wanted to make a virtual reality space for video games streamers. However, the existing hardware and bandwidth capabilities didn't evolve as fast as the company had predicted. So, even though it managed to deliver the product on time the company could not attract many users.
In a statement on its website the company wrote, “Unfortunately, the VR market never developed as quickly as we all had hoped, and we were definitely ahead of our time. As a result, Vreal is shutting down operations and our wonderful team members are moving on to other opportunities.”
Often the fear behind a delayed launch is that if the product isn't good, people won't use it or come back. So, the startups put all their energies into perfecting the products in isolation. But, here's the thing – it does not matter if a few people don't like the product. When you present them with an early version, they can make changes and feel a sense of ownership. Sometimes, such customers end up becoming your most loyal consumers for the long term.
As a startup, one of the worst mistakes you can make is not researching the market and studying your competition. It’s imperative to know first-hand what separates you from the rest. Because, once an idea gets hot in the market, you could suddenly find yourself competing with 10 other startups and not knowing what their strengths and weaknesses are. 19% of startup failures can be attributed to ignoring the competition.
Mac & Mia, a children’s apparel delivery service, went through a tragic fate when it found itself competing with successful companies such as Stitch Fix. The company had to close its doors just a year after its launch in the year 2018.
“Mac & Mia faced a host of competitors in the children’s delivery box space, including the aforementioned Stitch Fix, which launched its kids clothing service in 2018. Stitch Fix went public in 2017 and has a market cap around $2.7 billion. At least 20 other upstarts have launched similar delivery services for children’s clothes.”
There are times when your competitors can beat you to the race to a financial investor because you weren’t keeping tabs on them. This happened with Sidecar, a ride-sharing and B2B delivery service company which could not compete against Uber. Even though the company managed to raise over $35 million it was forced to sell to GM in the year 2016.
The statement by the company read, “In short, we were forced to shut down operations and sell. We were unable to compete against Uber, a company that raised more capital than any other in history and is infamous for its anti-competitive behavior. The legacy of Sidecar is that we out-innovated Uber but still failed to win the market. We failed – for the most part – because Uber is willing to win at any cost and they have practically limitless capital to do it.”
Not Having a Target Audience
The starting point for any startup should be to define a specific audience it wants to cater to. A large target audience means you could end up serving many people poorly instead of focusing on the ones that really matter. Many startups try to serve everyone for a bigger reach and that’s when bad service occurs. It is important to remember that product-fit comes when you know your exact audience and have built the product keeping them in mind.
For example, you can start in a broader category like targeting the millennial generation for gaming. But, as you move ahead in the process you should specify it to the last detail to get the best possible conversion rate. As your customer base keeps evolving, you can focus on developing more features based on their feedback, requests and customer surveys.
Trying to sustain a business is difficult, but building it from scratch is even more challenging. Creating a company that generates millions of dollars was never meant to be easy. Having said that, one can make it happen by learning from the mistakes of other startups that failed because they weren’t prepared. The above points give a detailed idea that every startup needs to work on if it is to survive in the market for the long term.
If you are a startup looking to bring your vision to life, we at illuminz offer out-of-the-box solutions and winning strategies that can help your business succeed. We can chart the right course of action that will exploit promising opportunities while keeping pace with innovation. Our team of efficient business strategy experts are adept at helping you navigate this journey so you are not alone and can benefit from our knowledge pool.
Get in touch with us today to discuss your project needs. We look forward to hearing from you.