Why Startups Fail: 4 Fatal Mistakes to Avoid

Palina Trokhautsava

Jun 04, 2021 • 4 min

Hello! I'm Palina, a content specialist at Fively. In my well-penned articles, you can find many exciting things about modern web development and IT business.

Have you wondered why the majority of startups fail so fast? Discover the top fatal mistakes to avoid the same sad fate.

We love working with startups. The founders are usually so enthusiastic about their ideas that their passion can not but radiate around. At the same time, you might have seen in many sources that about 90% of startups fail and the highest number of failures happen in the first several years.

As our work is closely related to the growth of businesses, we decided to analyze top startup mistakes that nip any beginning in the bud. Let’s improve the statistics together!

Product-Market Fit Based on the Wrong Assumptions

A product is the heart of any business. Unfortunately, 42% of startups die unable to achieve product-market fit. Why does it happen? This kind of failure has diverse roots. Some entrepreneurs focus too much on the tech part. They keep on building features without taking into account user feedback. This is especially the case of technology startups concentrated on their products. Another category of entrepreneurs is afraid of rejection and overreact when someone is not interested in their products. Others don’t have the courage to face the figures when the data doesn’t look good for them. Many business people fail to reach their customers. Though the worst scenario is when a product finds its fit but it turned out that its real market is too small.

There is no universal solution here. However, you can pay attention to the feedback and data analysis you get and dare to face bad news.

Money Issues

Startup founders admit they have limited financial capabilities. However, the problem is not always about the sum but the spending. For example, a business owner can hire many people instead of hiring the most important specialists. Or you can rush into marketing investment without having a fine-tuned sales funnel.

Even dedicated projects like fintech startups are not immune to miscalculation. Just try not to put good money to bad use.

A Team That Sinks Your Ship

Apart from the product, the right people are an integral part of any successful startup. Sometimes we choose the wrong people or can not lead them properly and our startup ship starts to sink. The wrong team is the reason for 23% of startup postmortems. You may hire candidates with strong hard skills and weak soft ones. You may think that a relative is the most suitable person to work with, though it would end with conflicts. Even when you put a suitable team together, you need to give them a roadmap and a clear vision for further activities. Otherwise, people may get stuck after discovering first objections and customers’ rejection.

Leading a team requires high responsibility. Nonetheless, if you are thinking about avoiding interacting with others, you are risking making another mistake.

Startup DIY-ing

Many startup founders try to do everything by themselves. The reason is clear - the austerity in order to hold on as long as possible. An entrepreneur is occupied with business development, technologies, sales, marketing, and a large chunk of paperwork. However, it doesn't usually go the way such DIYers expect. Instead of saving money they waste time and sink in endless micromanagement tasks. So, in the end, they find themselves run out of cash and incapable of continuing operations.

If this path resonates with you, determine the tasks you could automate and delegate. Find a startup development company for the technical part and focus on strategic planning, for example.

Conclusion

When you read the news from TechCrunch or GeekWire, you may be impressed with startup revenues or investments. Please keep in mind that this is just a tip of the iceberg. The hidden part is about a wrong team, money issues, wrong division of responsibilities, or a product without a market.

We do not want to discourage you with this blog post, though. When entrepreneurs think about how to begin a startup, they should treat it as a marathon. So, know your strengths, pay attention to different aspects and find allies. To begin with, Fively can become your solid team of startup developers.

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