7 reasons why 81 pc of Indian startups face failure

The last few years have been a rollercoaster ride for the entire startup ecosystem, with most founders going back to regular jobs and only a few going on for sustenance. Shortlisted from the many reasons why startups fail, these are the key seven:

Lack of vision

The first task is to know where you need to reach. One of the most important things is to have a vision and a bigger goal that people can look up to, especially when times are tough. This unites people in a single thread, in both the good times and the bad. This is important for startups with young founders, as they usually take some time to step up to the leadership challenge that entrepreneurship requires.

Lack of market understanding

Yes! Something as basic as this can be quite challenging to crack. Knowing the market, where you stand, and how you need to reach your goals is important for any founder. Scale, urgency, opportunity, and utility are of paramount importance here. Scale refers to the breadth of the user problem that is being solved. Utility and urgency are for the solution on offer and if it’s addressing a core need, or is only a good-to-have solution. Is it easy to use and can it address any loose ends that come with such a solution? Opportunity refers to the business opportunity. Are the solution and the working mechanism of the solution scalable to grow into a self-sustaining ecosystem, or it a stop-gap arrangement? There have been too many startups which went in head-on without a grip on the numbers and failed as a result.

Poor competency

Till you are bootstrapping, founders running the show is fine. But, the moment you raise funding, founders should do a hard skill-competency-interest appraisal of themselves and decide what roles they will assign to themselves. I fully subscribe to founders being the best product/sales/marketing managers as they’ve been living and dreaming their business from inception. But a word of caution here – this does not make them the best people to run the show. Usually, it is about interest, temperament, and domain expertise. The faster founders discover their strengths, the faster they will get the right people on board.

I see too many startups wasting 12-24 months and precious capital in learning the basics and then hiring specialists. Sometimes, it is too little, too late.

For the first few years, entrepreneurship is about ‘betting on people’. ‘Team’ is the business, at least, for the first few years. If your score is 8-9 out of 10, you will build a good/great business. This only happens when you tell your key people that you have their ‘back protected’, irrespective of the outcome. Even Tendulkar did not score a century in every innings, yet someone kept on backing him and giving him chances.

Poor execution

Online, offline, or hybrid – it is the execution quality of the business which wins or loses. In an economy like India, where businesses take 8-10 years to turn into a solid business model, there have been several gaping holes which make businesses fail. Attracting the right people for the right jobs is a very basic problem. There are both tangible fields (like production) and intangible fields (like brand solutions) which need to be handled by an expert. Vice-versa, expertise cannot work through. The daily experience of a brand, via the product for both in- and field-office teams, is a major miss because criteria are set on x number of hours rather than the targets, which probably need lesser or more hours.

Revenue models and data-based execution is also missing in several startups because of the lack of understanding of how resource allocation needs to be done. Data-based executions also take a back-seat due to an unnecessary belief that ‘their’ (the founder’s) thought process is the only right way. Another unfortunate miss is the lack of decision-based training and delegation. Since people come from a delegation model, the decision process is slower, and this lack of empowerment leads to delays and lack of accountabilities.

Excessive focus on weaknesses

Exerting more on the strengths rather than concentrating on the weaknesses is a novice folly. Since most founders are first-timers, this is a fault which takes their focus away from the job at hand. A thorough SWOT analysis of different periods of a startup’s growth will show the weaknesses and strengths. The strengths need to be amplified to the extent that weaknesses can be relegated to a nondescript corner. Similarly, for the founders, if they identify a weakness within themselves, they should hire the right resources who have that as a strength, so that they can focus on their own strengths.

Every founder cannot be the CEO

There can be only one CEO, even if there are many founders. Only one person sets the vision, and the others execute after there is broad agreement over what needs to be done. Too many people trying to display the big picture is a waste of time and shows role ambiguity. “Too many cooks spoil the broth” comes in when everybody is the boss. Direction comes from a single person and that position must be stable, secure, and given space to experiment, with a reasonable error margin.

Meritocracy

This should be ruthlessly executed from the top down. The agenda is to build a business and not protect anyone. Right people doing the right task is the only way to build a business. With a well-laid appraisal mechanism, talent must be timely rewarded and given a greater platform so that they feel as much as a part of the venture as the founders. It takes 8-10 years to build a good/great business, and without a performing team which sticks around, it is simply not possible.

Vineet K. Singh is a renowned industry veteran, who has led success journeys of many leading startups such as MobiKwik, 99acres, and Naukri.com. In his last role, Vineet was the Chief Business Officer at MobiKwik.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)