10 reasons why most startups fail to scale
Starting a venture, may be easy, but scaling it is the most difficult part. Statistically an overwhelming majority of startups shuts shop because they fail to scale up. Some of the top reasons why a startup faces problems when scaling is listed below.
1) I am the first one:
Every great idea needs to be thoroughly researched. Most founders
think their idea is unique and solves a very real business problem.
That, however, is mostly not the case, as unique and groundbreaking
ideas are far and few in between. It is highly likely that someone
else has already thought of your great idea and that it is already
operational. A thorough research will also throw light on several
issues like market size, willingness to pay for it, barriers to
entry, competition and investor interest.
2) We are techies:
2) We are techies:
Startups
in the technology domain often comprise of people with similar skill
sets. Two or more techies with great coding skills often get together
to work on an idea. While this may be great when overcoming a
technology problem, lack of understanding of other key areas like
marketing, finance and management can spell doom. A startup needs
founders whose skill sets are complementary and not similar. This
also reduces conflict within the founding team as each member handles
a specific area.
3) We can do it part-time:
3) We can do it part-time:
Founders
often make the mistake of working on their startup part time. A
startup needs considerable amount of time and effort and a founder
would not be able to do justice by working on it part time. There are
very few startups in the world that have been successful when
founders have not devoted their full time to the venture. Keeping a
day job when researching an idea makes sense, but once a founder has
taken the plunge to startup, it has to be in full earnest.
4) Fear of funds:
4) Fear of funds:
One
of the most vital ingredients to scale is access to capital and
funds. Once a startup has shown proof of concept and established its
go to market, it needs funds to scale and grow. However, fundraising
is very time consuming and tedious and more often than not you will
have founders getting immersed in the process at the cost of day to
day operations of the venture. If the startup has more than one
founder, only one should be involved in the funding process while
others should keep their focus on the venture. Receiving funding is
not the only panacea to all startup issues. At the same time it is
very important to know the objective of the funds and to what use it
will be put to.
5) What if I fail:
5) What if I fail:
Every
idea needs to be tweaked and changed after starting up. Founders
often fail to clearly anticipate market dynamics and end up making
make faulty assumptions. Many a times startups need to pivot to
become relevant and perform better. However, most startups prefer to
maintain status quo and do not even think of change if it means
tweaking their core idea. It is important to understand that even
very successful companies have felt the need to align their business
and a startup that is open to try things differently adapt better in
business.
6)
I checked with my friend:
A startup that has been started because friends loved the idea may
find the going tough. A handful of friends, who may be biased in
their views and opinions, cannot be the sole reason to startup. It
goes back to my first point that talks of a thorough market
research. Nothing can beat a thorough market research and friends
should only be the first option to bouncing your idea - not the
only. Most startups fail because they don't have a real user
community to give feedback. Create focus groups among the target
audience and test out what they think of your idea.
7) How will I make money:
7) How will I make money:
At
the end of the day every business and every startup wants to make
money and every founder wants to know the route to make it happen.
While monetization is key to success of any startup, monetization
should not overshadow the problem being solved. A real solution to
genuine problem drives automatic monetization. For example Watsapp
as a platform is hugely popular with over billion dollars in
valuation, but still has not come up with a clear cut monetization
angle. A startup should concentrate on creating the best value for
its customers, money will follow soon.
8) I need a big office:
8) I need a big office:
While
most startup bootstrap from their home, they want to graduate to a
big office as soon as they make some money. While an office may
prove to be beneficial, it is not absolutely necessary. Startups
need to be frugal and accelerators and incubators can also double up
as a good office. Beyond them, there are plenty of coworking spaces
today that can provide economical options. A startup should
capitalize of its early successes and plan out its finances, taking
into account rainy days.
9) I want to launch big:
9) I want to launch big:
An
old adage says learn to walk before you learn to run. Every launch
and subsequent scaling up needs to be gradual. It is important to
test the idea and refine your solution before you reach out to
global or a larger user base. There will always be teething issues
when launching a service and product and this needs be sorted before
scaling to a larger audience. Customer experience is one of the key
factors for success and when scaling rapidly there is every chance
you may end up having irate customers. Gradual scaling ensures your
systems and processes are in place to provide the best
experience.
10) I can do it alone:
10) I can do it alone:
Last
but not the least, while most startups start with one or two
founders it is important to identify like minded team to scale and
successfully bootstrap your venture. A startup needs a team that
believes in the founders' vision and is willing to go the extra mile
to ensure the success of the venture.
By
Ashish Mittal16
Dec, 2014(Ashish
Mittal is founder and Chief mentor, Turning Ideas, focused on helping
multiple startups in mobile, social and cloud domain. He was
instrumental in starting Google Enterprise business in India and
worked for Microsoft, Oracle and IBM.)
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