Top reasons why startups fail

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Startups are mostly associated with innovations that are set to revolutionize the business and technology world. In the past decade there has been many huge startup success and many more smaller, but notable ones. However, we also have had a number of them have fail miserably and a lots fizzle out and die. So what really distinguishes a successful startup from a non starter? You can find myriads of reasons that can be held responsible for startup failure, but most come down to a lacking in some fundamental business basics. We have compiled some common reasons why startups fail, so you the small business owner can learn from the documented failure of others.

Lack of idea direction and lack of market research

Innovative ideas with distinctive factors often can place startups in the limelight, further driving their viral uptake in the market place. Therefore, a startup Lacking in innovation, with poor market research, are often doomed before spending their VC's money on fast cars and fancy decor. It is vital to perform thorough market research on trends that can be linked to the idea that you have in mind. Design your Unique Selling Points (USPs) around these factors for success. There are many great ideas with no market and a failing business.

Over spending and lack of investment

The Dotcom bubbles was famous for this, a fresh startup would get millions in funding then the founders would start living the life of rockstars. Quickly the funds would dry up and the startup would burn to the ground. Seed money is for investment into the foundation of the company, not for casino, fancy cars and ego. Many startups have failed on this point alone.

Additionally, over investment in non-revenue generating ares or poor investment can be equally disastrous.

Lack of technical knowledge

Lack of technical knowledge from the founders can kill and has killed many a startup. These range from big to small. Trying to outsource the core technical knowledge for a tech startup can be a death sentence. Without a technical expert in the founding team there are to many aspects in witch the project can be miss-managed out of ignorance. Additionally, it can blow technical development budgets out, directly because of the lack of technical skill. After all how is a non tech person even able to oversea the details of a tech project. You might as well hand the project management over to a Bonobo for all the good you'll offer. Every month we are called into rescue a bungled project, which has been managed by a team of non technical founders. There is always a lot of finger pointing at the techies in the dirt, but it always quickly becomes apparent the problem originates from the top levels lack of technical knowledge, execution and management.

A similar story can be said for; finance, staffing, marketing, design as well. However, when your core product can not be built correctly you are headed for disaster.

Dwindling leadership

Surprisingly common and understandable. A CEO will blaze onto the scene working themselves round the clock and pushing everyone in the team 24/7. They hit some funding and their interest disappears and things start to fall apart. Whether this, is burnout, success depression or they are just over it doesn't matter as the end result is failure. Leadership needs to take time to work on themselves to succeed as the company grows too.

Executing to early

In some instances ideas have literally come to early for the current tech and market. Later seemingly the same idea has hit gold and never soared to success. This does come back to knowing your market and having the technical knowledge in the founding team. However it has been the result of many a spluttering miss fire.

Greed during funding rounds

Again a lack of expertise within founders causing issues. However, the nuts and bolts of the situation are many startups have priced themselves out of more funding, by being to greedy early on and not thinking long term to their next funding round. Founders need to make sure they think long term and leave enough of the pie so future invests feel they are still getting value for their money.

Lack of understanding in general business models

A flawed business model is inevitably going to fail, regardless of funding or uptake. Long before you put your idea into practicality, it is essential for you to formulate a strong business revenue model. Furthermore, a planned burn rate is essential. Along with a well thoughtout practical action plan with deadlines and goals. Without it you are a small board with out a rudder in a massive storm.

Lack of targeted marketing

There is a sea of potential customers for just about every niche on a global scale. It is indispensable that you identify and target your marketing campaigns to the customers to whom, your product or service really helps. Often a common mistake is not going niche enough first. It is best to target a smaller niche market first,to create advocates who will then help promote your product/service more organically. When you pivot your marketing to a more general market it will serve you well, to have a strong base of cheering advocates.

Lack of competitor analysis

Pre and post competitor analysis is very important. Not keeping tabs on or understanding potential threats to your growing market share can be a quick death outta nowhere. Always keep tabs on your competitors and try to closely follow their advertising campaigns and their efforts to improvise the product or service under consideration. In the world of the internets of everything, you have resources like open site explorer, ahrefs etc to measure the performance of your competitor’s website with respect to activity and of course social circles. Failure to stay ahead of your competitors has resulted in many a quick startup collapse.

Ignoring prospective customers

Irrespective of how wide your audience base is, it is inevitable that you treat them with care. Create a potential customer persona by forecasting their requirements and expectations with respect to your product or service. Failure to engage directly asking for feedback can send you off in the wrong direction. You can also miss opportunities to pivot, that may never have existed. Becoming so full of yourself you forget to listen to customers can result in instantaneous mass extinction of your customer base, when they become feed up with being ignored.

Keeping a startup abreast with its competitors is a challenging task. Time and effort are inevitable and pool yourself with brilliant minds to ensure the longevity of your startup.


Complexcom. (2016, no-date). The 50 Worst Internet Startup Fails of All Time. [Weblog]. Retrieved 17 July 2016, from

Zdnetcom. (2016, no-date). The worst tech flops and service fails of all time | ZDNet. [Weblog]. Retrieved 17 July 2016, from

Cbinsightscom. (2016, 17 March 2016). 92 of the Biggest, Costliest Startup Failures of All Time. [Weblog]. Retrieved 17 July 2016, from

Techco. (2016, 14 March 2016). 6 Most Common Reasons Why Startups Fail. [Weblog]. Retrieved 17 July 2016, from

Stfire. (Fri , 18 March 2016). Top 20 Reasons Startups Fail (Infographic). [Weblog]. Retrieved 17 July 2016, from

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