Wednesday, December 31, 2014

STARTUP SPECIAL ......................10 reasons why most startups fail to scale

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:
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:
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:
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:
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:
    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:
    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:
    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:
    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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