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Why Start-ups Fail By Tarun Kumar

I’m associated with entrepreneurs and start-ups for several years. One thing that predominantly strikes out is that the majority fail in the first few years. In fact, after five years, only one in ten is still in the race. If more than two-thirds never deliver a positive return, what makes the journey so enterprising? This one question I try deciphering as no easy answers are available.

I have drawn from my experience of creating entrepreneurs through my soldiers back in the Army, brainstorming with entrepreneurs, my experience as an angel investor, and my work with start-ups as a mentor. Everything with the sole aim of creating a sustainable venture.

If you have been to a racecourse, you will hear about horses and jockeys and self-possessed

investor bets on a seasoned jockey. In the start-up context, the horse

represents the opportunity and, the jockey is synonymous with a founder.

I have been a Mentor in angel investing communities where, when forced to choose, most investors would favour an able founder over an attractive opportunity.

The most important question was when this new venture would eventually stumble, most was opinionated to cite inadequacies of the founder, their lack of leadership judgement, industry ability, and inability to exhibit moral fibre during adversity.

Although there are plenty of reasons to simplify things, I’ve chosen to focus on two prime reasons for the sake of simplicity and ease of understanding. The number one reason was “no market need” or, in other words, there was no customer.

Start-ups fail when they are not solving a market problem. They may have great technology, data on shopping behaviour, or reputation as a thought leader, splendid expertise, great advisors, etc, however, the need was technology or a business model that solved a pain point in a scalable way. If only the start-up founders had listened to what their customers were trying to say.

Some workers at a web content management company admitted not prioritizing customer input. They said, “We spent way too much time building it for ourselves and not getting feedback from prospects — it’s easy to get tunnel vision.”

Another reason for failure was not having the right people on board.

The lack of alignment among the founders and their investors was equally to blame. Business is fundamentally a human endeavour – humans trying to connect to other humans.

Products, technology, business models, funding – success in these dimensions results from getting people right. So ultimately, start-up success comes down to people – the people inside the organization and the people outside it (customers).

Today, the lack of integration and alignment between these two groups of people is why start-ups fail. The biggest, most tragic failures happen when people inside the company don’t care about customers or don’t cultivate a culture centred on the customer.

Sir Richard Branson has built his global business empire on his

unique principles and ethics where the general adage, “The customer is always right”, has espoused the cause of, “Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.”

Let these two reasons be the foundation of your success and serve as stepping stones for aspiring entrepreneurs. People must be your priority and, they must be aligned. Your customers and your people drive your business. Ignore them at your peril.

The start-up ecosystem can learn from the mistakes of others and benefit from the potential knowledge shared on this platform to overcome the jinx of research. It concludes that 21.5% of start-ups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.

Are you a budding entrepreneur or start-up seeking more

guidance and inspiration on growing your business and

protecting your business ideas, products, or services?

You’re in luck – Tarun Kumar hosts a string of workshops, talks, and one-on-one

engagements. Click on the links below to book a slot and be successful.

Col Tarun Kumar (Retd)

+91 9100704123

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