Why Startups Fail?

There are only three things that can kill a startup:

Running out of cash:

This is the biggest reason why most startups and even some of the large organisations fail. They run out of cash. Startup founders would give themselves a much better chance of success if they are able to figure out a consistent cash flow. Profitability can come later in the life of a startup, cash flow must come first. This is akin to oxygen for humans. No oxygen, no life. No cash, no startup. Cash can come from investors, customers or founders. The most sustainable of the three is the cash flow from customers.

Running out of customers:

This is another reason why many startups are unable to survive. They built something for which there are no customers.

In order to avoid this scenario, startups must define their target customers really well, identify the impact that their product will have on the lives of these customers. They also need to continue to test their products with their prospective customers. Building a product for everyone is another trap that startups fall in. Build for a small niche and then scale to other niches.

Running out of employees:

This is the least common of the three reasons but very powerful nonetheless. This happens when the team doesn’t believe in the product anymore. This happens when one or more founders don’t believe in the vision (or there is no vision to start with).

To avoid this, the founders must have a vision for the startup and constantly communicate with the team; hire slow and fire fast.