Every year, countless startups are launched, but only a really small percentage survive to become profitable. Studies show that only 20% of startups are ready to survive for quite 5 years and only 8% manage to survive beyond 10 years. The chances are stacked against a replacement startup founder.
Countless startups are being launched every day in India. A survey of Indian executives conducted by the IBM Institute for Business Values and Oxford Economics revealed that despite India’s flourishing entrepreneurial culture, over 90% of startups don’t survive beyond their first five years of operation.
According to the info from Mint, Indian startups faced an enormous challenge in the year 2022. Despite getting massive funds from risk capital, angel investors, and institutional investors, couldn’t deal with economic uncertainties at the worldwide level. Unfortunately, a number of them couldn’t survive anymore and were packed up within the same year.
India has 105 unicorn startups and surprisingly only 23 of them are profitable. The rest of them are a resource sink drawing in billions in funding from venture capitalists and investment firms around the world. In 2021 alone, Indian startups received $41.4 billion in funding and therefore the year also marked the increase of 42 startups.
Let us take a glance at the highest closure reasons why most startups fail in India and the way you’ll avoid them.
Indian Startup Shutdowns
Lido Learning
Qin1
Guruji.com
ShopX
GoNuts
BabyBerry
RoomsTonite
Turant Delivery
Roder
Yumist
Udayy
SuperLearn
Shuttl
Mastree
Drivezy
Hike Messenger
Niki (Niki.ai)
SMAAASH
Reid & Taylor
Harley-Davidson
Reasons For Failed Startups in India
The below-mentioned examples shed light on significant issues that are liable for the failure of nearly 90% of the emerging startups in India:
1. Lack of Funds
Having sufficient funds for any startup is one of their necessities because the funds help the startup sustain and fulfill its financial requirements. You’ll have great business or startup ideas in your head, but once you’ve got funds, you can only do something.
Even to start that business, you would like funds. And after starting the company, you’ll require funds to keep it going. On close observation, it’s evident that the funding crunch caused most startups to pack up.
2. Failure to identify the proper Customer Base And Sub-Par Quality Of The Products Offered
Failed startups in India have made the crucial mistake of failing to seek the proper consumer base. For their products or services to succeed, startups must have a transparent understanding of their target market. Startups can reduce industry competition and assess the ROI by focusing on a particular audience.
Startups should carefully research their markets before launching their products or services to ensure that they meet their intended market’s stress and preferences. Startups can improve their chances of success by knowing their clients and providing value to them.
Some startups compromise on customer service and, therefore, the quality of their products; the compromise always leads to the closure of business.
3. Lack of Focus
Most startups aim to do too much as a brand or lose sight of their goals. They lose focus too often. When a startup has multiple products and a limited amount of time to figure out each, it must distribute all its resources in chunks to ensure each product gets attention.
As a brand, you ought to specialize in a core product and check out to enhance its quality to appoint where this is the only product or brand within the market that can compete. That’s what gives you your USP within the market. It’s better to develop one supreme-quality product than to flood the market with numerous average-quality products.
Excessive amounts on the plate are often disastrous for a startup because they cause more chaos in an already chaotic environment. It’s one of the most essential reasons why Indian startups fail.
4. Lack of Innovation
Innovation is the most vital business strategy for determining the success or failure of Indian startups. Lack of creativity is one of the most common causes of startup failures. Startups succeed once they provide original and artistic approaches to unravel issues. For instance, within the Indian smartphone market, Nokia, Micromax, and Spice once gained power.
They didn’t need to innovate or adapt to changing consumer demands. They thus lost ground to foreign companies like Xiaomi, which provided cheaper and superior goods. The most important takeaway is that companies must attempt to produce something unique and new. They could specialize in offering value to their audience and resolving actual concerns.
5. Product Market Fit
It is a simple factor that most startups fail to incorporate in their detailed business plan. Product market fit assesses how well a product or service fits into the market. Or is your product just needed by the customers? You’ll sell water during a desert, but there’s no point in the sand of sale if your product has no utility or doesn’t solve a drag for the customer. What good is the product anyway?
It’s essential to research the market and find out precisely what the consumer needs; that’s the primary step to putting together a successful venture. You would like to search for a niche within the market and then develop a product that fills that gap. Check out Zerodha as an example; it is one of the country’s foremost successful unicorns—a zero-brokerage stock exchange solution for anyone wanting to position their hard-earned money within the stock exchange.
6. Unceasing Cash Burn
With the quantity of funding Indian startups have garnered in recent years, cash burn has been a severe issue. Startups now have enough money to run multiple million-dollar marketing campaigns and hire a military of employees. But many dollars within the checking account don’t mean you have to spend all of it on things you don’t need immediately.
When startups receive funding, they cash burn rate rapidly on things they don’t need and eventually exhaust these funds, then continue to boost more funds through a further round and add more investors to their portfolio.
But when the losses are compiled, and they haven’t any profits to negate them, the investors start building pressure and are forced to chop expenses by shedding employees and cutting the marketing budget to half. Therefore, the pressure is one of the main reasons why Indian startups fail.
7. Highly anticipated model, not in sync with the nature and lifestyle of the Indian population
Some startups failed because their highly anticipated models weren’t appropriate for Indians. Startups should either await the proper time or educate their future consumers about their technology beforehand. Also, the corporation should pivot only after a radical market study.
8. Lack of Agility
For startups to bring competitive advantage, agility is vital. There are many issues that startups will face, which they often do. Here, they need to unravel market challenges by finding solutions. So, startups need to be agile and adaptive, which can help them progress.
9. Failure of Business Model
More than just an honest product with an inspiring website and spending enormous cash on ads isn’t needed for a startup; they have to think about customer acquisition costs. The startup must have an efficient business model to sustain and profit.
10. Failure in research for Market Share & Conditions
One crucial error made by unsuccessful companies in India could also require in-depth market research when determining their market share. This ignorance may end in creating products or services that do not appeal to the market, low client acceptance, and eventually failure.
Start-ups must devote time and money to plug research to get the characteristics, tendencies, and problems of their target market. Start-ups can have strategic misalignment themselves, target the proper audience with their offerings, and achieve a competitive advantage by performing in-depth research.
How to Bounce returned out of your Startup’s Failure
Here are a few guidelines to get over your startup’s failure:
1. Share Your Feelings
Keep in contact with friends and family to stay calm and comfortable during failure. Find a mentor or a bunch of skilled people. Learn from them. Seek steerage and intellectual guidance from mentors and marketers about operational issues with visible achievement and failure.
2. Find Different Sources Of Income To Recover Your Loss
Failures will cause economic insolvency. So, paintings on increasing your earnings stream. Contact mentors and marketers for pointers on earnings generation. Calculate how lengthy your financial savings will be and plan accordingly.
3. Prepare and plan consciously
We learn a lot after adversity. Use these lessons learned to organize and prioritize. Make a survival plan. The founders of the startup are very satisfied with the design and implementation. Appoint suitable founders and employees to help you. Hard work always pays, so keep working until you succeed.
4. Wait for the right time to find suitable opportunities
Do not make critical decisions during leadership failure because the spirit is depressed. Take all the time you need to decide, but once the thought process is in place, don’t go back and think about failure. Great opportunities rarely come. So wait for the right moment.
5. Actions speak louder than words
Be aware of your actions after many failures. The right attitude is crucial in stressful times. Take the necessary actions with the right attitude and do the post-mortem analysis. Say no to inadequate opportunities. Work to the best of your abilities. Aim high and let your failure be a stepping stone to success.
FAQs
1. How many startups fail in India?
Ans : According to a 2019 report, quite 5 million startups are founded annually.
2. What happens when startups fail?
Ans : The startup may gather outstanding accounts, take up loans to settle outstanding debts, sell resources for paying debts, and cater to the investors who funded the startup. Venture capitalists and other investors usually find themselves at a loss when a startup fails.
3. Why do 90% of startups fail, or why do most Indian startups fail?
Ans : Here are a number of the main reasons:
- Lack of funds.
- Highly anticipated model against the character and lifestyle of the audience.
- Poor customer service and low-quality products.
- Lack of focus and legal disputes.
4. What is the most challenging business to start?
Ans : Businesses that need considerable funds to start with are the toughest to start. Businesses concerning logistics, restaurants, and travel agencies are deemed a number of the most challenging companies to withdraw.
5. What is the safest business to start?
Ans : Businesses that need low investment are the safest. Some examples are logo designing, digital marketing, website building, online tutoring, virtual assistance, etc.
