The most important reason of startup failure

Everybody is talking about the reasons of a startup failure, but it seems most of us have missed out on the most important reason of a startup failure.

Amit Gupta
5th May 2017
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Reason of startup failure

I see everyone wanting to quit the 9 to 5 routine, but lack risk taking appetite. They have seen people failing but what they haven’t seen is the reason of the startup failure. The lack of knowledge and guidance scare then enough and the fear of failure force them to continue with 9 to 5 job. Only a few take a bold step of quitting and starting themselves. A few days ago I wrote about the top skills that will be in demand by 2020. It's important to know your core skills. But to use them for yourself or for somebody else is completely an individual choice.

The idea of a startup is thrilling. But we all know that 98% of startup fails. I have myself failed in my first startup. But, being a part of the startup group, I have attended many seminars and have read a lot about the reasons of startup failure. Industry experts have done a complete post-mortem of startups. But they all have completely missed on the most important reason of why people fail. Sure, that’s my opinion, and based on a research that I have done with hundreds and thousands of people. I will talk about a little later but first let me list down a few common reason of failure.

Common Reason of a startup failure

Market Need

If you base your decision on research, you have high chances of being correct. People lack research in the eagerness of starting up. The dream of making big money takes you away from fundamentals. The idea needs to be well researched. Find out the top and bottom performers and know the reasons of their success and failures.

Shortage of Funds

Estimation and budgeting is little trickier part of any business. You need to break your entire business plan in small modules. Note down all the expenses that you can foresee in different modules. I like to add 10% of total expense under uncategorized head. At the end sum up all the expenses for all the modules. This helps in creating a strong and elaborated budget sheet. If you are able to estimate, you know how much money you would need and when. Lack of experience leads to poor budgeting and startups running out of funds.

Right Team

This is where the founders have to take strategic decisions. Hiring for startups is challenging enough, leaves you with no choice of hiring bad. Mistakes happen, but most of the startups fails in finding the bad team members and getting rid of them. Bad employees push you away from success.

 Product/Service Quality

The core of a startup is the value proposition for the customer. People fail in competition analysis. You need to find the strength and weaknesses of your competition. Listen to your customers and add their inputs. This will ensure that you add the quality that customers were looking for. The speed should not kill the element of competition and need analysis.

Business Model 

What, why, who, when, and for whom are necessary ingredients of a business plan. You need to have an understanding of the business before writing the business model. I know many failed startup because of their unclear sales plan. You need to understand your customer needs and spin your business model on this pivot. Customer oriented business models are generally successful.


Almost all startup dream of getting quick funding from the investors. Trust me folks, when you think that way the entire approach towards your startup is different. You will start investing energies in finding possible investments. The focus that should have been on the product/service, will now shift towards investors. It has never worked that way. Your focus should be the solution and its value proposition. If the customers are liking your solution, investors will hunt you down.


Startup is like growing a child. It has its own fun and it has its own hardships. Since you have to do everything yourself, you have to stretch yourself to work long hours. I have seen entrepreneur crashing because of the hard work they put in and the time it takes to hit success. Patience is the key, the core team needs to be persistent.

Lack of mentorship 

The smaller you are, the challenging it is. Startup must understand that they will go through many known and unknown challenges. It's easy to deal with a known challenge, but you need mentor who can help you see the unseen. Mentors help you make corrections and connections. They will save you in going wrong and hence save your time and money. You will risk failures if you do not have mentors helping you shape your startup.

Sailing in two ships together 

I have heard this many a times, and many experts have been teaching this a lot. Do not leave you job until you make your startup successful. People want their salaries to continue and believe to use their extra time to focus on their startup. Yes, it is possible but only for first few weeks or may be a couple of months. And then the problems lead to startup failure. The time and attention that your startup will need will increase. You will struggle with divided attention in your startup as well as your job. Add up this to the negligence towards family and your health. And Boom!

Good to think that we will multitask, scientists have proved we cannot. Take a decision, job or startup, and move on.


I am listing it in the last, but this is of high importance. If you and your co-founder have harmony between, it goes a long way. A startup has to go through tough times. You need somebody’s shoulder to lean when the day goes wrong and it will be of your co-founder. Be careful in your selection. In my experience, avoid your relatives or friends to be your co-founder. Find your weaknesses and then find a co-founder who has those weaknesses as his strengths and team up.

The list can continue but to me the most important reason of a startup failure is beyond what I have listed so far.

The most important reason of failure 


In my journey of last 4 years, I have helped many folks in shaping their existing startup or helping them start of. One thing which was very common with most of them, if not all, was that they did not know what they are good at?

Does it sound strange? If yes, then ask yourself this question. What are you good at? What is that that you can do for long hours without anyone asking? Remember, I mean productive and constructive things, not watching television. After you have answered what are you good at, match this with your current profession/work. Are they the same?

Then answer often is "No". And that is why we do not enjoy our jobs and want to quit to start something of our own but end up making the same mistake. Instead of discovering our core strength, we try to learn other skills.

Let me tell you a fact. No body becomes successful because they were a rock star. Because they choose to do work on their core skills, they looked brilliant and successful. This applies to each of us. If you want to be successful, first identify what you are good at. Trust me it is a complex process.

The process of monetizing your passion 


As I said earlier, it is a complex process to identify your passion and core skills. The earlier you do the better it is. It took me years to find what I am good at. I will talk more about the process of identifying your skills and how to monetize them in my next article.

Till then leave your comments and suggestions that can further add to the current topic. If I have missed something, feel free to write to me. I will be more than happy to add the missing links into this article with a credit to the contributor.

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