Why Tech Startups Fail?

This is topic is quite common over the internet and you might wonder why I write the same thing again. Even though it’s so common out there still we see that there are so many startups get failed and some of them don’t even know why it happened even.

I thought of listing few main reasons according to my perspective.

 

• Not identifying the core competency of the business

When you are starting your business you always come up with an idea and you analyze what made your business a unique one. But at the same time you need to realize the core competencies of yours. No matter how tech savvy your product or solution is if you don’t have an amazing team to carry on the work you want to do then it will all go to the waste. So if you have a bunch of teammates who makes impossibilities to a reality you should focus more on them to keep them whatever the cost it takes. It is worthwhile. This cost doesn’t mean the money value. It sometimes empathy, care, trust and understanding. You should not forget that you are working with bunch of risk takers and they need special kind of attention. You will know why when you go through my article.

• Not understanding what module actually bring the profit to the company

Yes, you have a product and it is unique. And some people are ready to buy your product or service or whatever the solution you make. But your high-end technology solution might not be the reason which brings you the money. May be that’s not the uniqueness others see in your product even though you see it as the money generator of your business. Your product along with another complimentary service that you are providing might be the biggest reason for customers getting attracted. So you should always be aware about this.

• Higher cost of fabrication 

 

I don’t think that this is a common issue for every country. But tech Startups in Sri Lanka suffer a lot because of the above reason. When it comes to fabrication we have limited resources here. Material cost is high, Operational cost is quite high and some fabrications are not even exist in Sri Lanka. So have to seek support from India, China, Singapore, Cambodia and etc. Even though the cost is low there, the time you need to spend on this is quite long.  Sometimes it takes around 2 to 3 months. So by that time another competitor will come strong with another product to provide the same solution and you are late to step in to the market on time.

• Lack of market research on Competitors and Existing solutions

When you are in the initial stage of the product development, you always focus more on completing your product or solution and releasing it soon to the market. There’s nothing wrong with that. But this “soon” is so relative. It can be 6 months, 1 year or even more. It totally depends on the complexity of the solution. But you cannot say that you are the only person in this world who has this idea in mind. Even though your idea is in Blue Ocean, by the time you develop it you might be shifted in to the Red Ocean. So you always have to aware about your competitors. Not only that, some of the existing solutions slightly similar your solution can easily implement the same solution that you are going to implement in a shorter time period with a lower price as they have the domain knowledge, experience and expertise in the industry comparing with your startup.

• Not doing continuous research on customer requirement 

This is not just for the startups, basically every business should focus on this. Technology changes rapidly. So you cannot stick to your solution as it is without thinking future enhancements. Requirements also get changed with technology changes. For an example, Kodak reels were in trouble when digital cameras came in to the market. So Kodak could have identified the risk as they were there in the camera industry almost since in the beginning. So when you have a solution, you always should think what sort of disruptive technologies are there that can jump in to your product space and with those, how requirements of the customers can change accordingly.
And one more thing! Especially when you are running a startup, trial and error process is totally fine if you are having money to run those trials. BUT, you always need to think about the TIME as well. Others might outrun you!

• Difficulty of gaining and retaining employees 

When you are running a startup it’s kind of really difficult to gain and retain employees. Your business is new. You don’t have a long history in the industry. So people are bit resistant to apply because they worry about the job security. You are unable to reach high salary scales since you are still struggling with expanding your business. So even though you have started your business with a set of close tech geniuses, with the pressure they get from their families, friends and peers, it’s really difficult to retain them for a long time.
Even sometimes with all the pressure that you are getting from your family, peers and friends, you feel like to shut down your business, join another company and work under another person. As soon as you become an owner of a startup company, you absorb set of risks to your life.
It’s a total mind game. When two of graduated from a same university at the same year and one is working as a software engineer under a most reputed company in the world for an awesome salary and one is working with a startup company as a lead developer for a low salary. Hope you can imagine how it feels like. In a long run, the person who works at a startup can be a CXO earning huge amount of money while the other person promoted as a lead developer for a another 25K rupees salary increase.

Likewise there are few more reasons to add. Only focusing on technology improvements, working in separate silos, lack of seed funds also can be listed down here. This list can go really long. No matter what, one of the main thing that you should keep in your mind is that you are different than others. You want to make a change. So it’s Okay to take a risk and don’t be afraid to be failed. BUT, you better have a plan when you are jump into this. You put your effort and money into this. So make it worthwhile. Always evaluate your environment as much as you can and try to adapt with the requirements out there. No matter how good your technical solution is, if there’s no requirement out there to buy your product then you will fail unless you create a requirement or a trend. We’ll talk about that later. 😊