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Reasons for startup failure in India


Some common problems which lead to failure of startups in India

New Delhi-Oct 12, 2016. Rednewswire/-

The Indian market today consists of a number of startups. Though Theses budding startups are contributing towards to the development of our nation, most of them are merely struggling to survive in the market. Since all the startups cannot survive, a number of them are already failing at an alarming rate.

The Economic survey of 2015-2016 released by the Government of India  shows that India has a total of 19000 technology startups. These startups are mostly started by well-qualified people but are still unable to survive in the current business scenario. Most of the startups are backed by huge investments and finest human resource but are still unable to stand out.

Well, there are some common factors which triggers the ruination of these startups.

  • Lack of Innovation 

Innovation is the key to any successful business. If the business India lacks innovation it cannot survive for long. Sometimes in order to make it big and deal with success, some businesses lose the essence of their USP. Keeping the vision uniform, startups should experiment with different products or services. A young and capable team which considers this important factor can lead to the success of the startup. The reason why Google has been able to stand out in game is because of its innovations. This keeps its customers and investors hooked.

  • Impatience

Youngsters with little or no experience at all deal with a lot of business pressure which often leads to downfall. This is one of the biggest reasons for startup failure. Once they arrive at a point when they can’t take any more pressure, they back off. One example is the startup company, Dazo. It started up as an online kitchen with tie ups from some restaurants and hiring its own chefs. Though the company was funded by a large number of investors, it failed to survive. The founders were more concentrated towards technology rather than the services.

  • Target audience and time factor

Before coming up with a startup, one should consider the target audience without which the startup won’t have anyone to cater to. People are setting up startups without focusing on the current market scenario. India has a large population of middle class for whom some products can be useless. These can be a mobile app which can operate TV or AC, a medicine home-delivery app, a social networking site that connects unemployed people etc.

The timing for launching a startup is another major factor. The riming should be either downward or spiral upward. A great example of this is Apple’s Newton, it was basically called MessagePad but was named Newton and was launched in 1993. The products was highly overpriced according to that time period. Its main feature was the handwriting recognition technology which was revolutionary considering the time.  In 2010, Apple launched Ipad which was a huge success. Hence, timing played a huge role here.

  • Huge Equity dilution

Many startups give huge portion of their equity in the beginning which causes conflicts as the number of investors increase. When more and more people start pouring in, there is high tendency of having conflicts and differences in opinions. The founders of any startup have a specific goal in mind which other people may fail to understand.

In 20016, Facebook was earning a revenue of 30 million dollars which was not profitable for the company. They received an acquisition offer from Yahoo for 1 billion dollars. At that time, Mark Zuckerberg was just 22 and held 25 percent stake of the company. He simply declined the deal although everyone wanted him to accept it. When he was asked why he did so, he answered that he had no idea what he would do with so much money and may end up starting another social networking site. Zuckerberg was able to take that decision only because he owned a considerable amount of equity.

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