Why Do Start-Ups Fail So Often?

It is common knowledge that many start-up companies are like;y to fail. If you’d like your start-up to beat the odds, there are a few things to keep in mind.

Bill Davidow, once the senior vice president of Intel, wrote a book called “Marketing High Technology.” In his book, Davidow talks about what he calls the “Strategic Principle”, that marketing should create complete products and position them in defensible market segments. This means that while your technology must be good, you must also be fulfilling a real or perceived need in the mind of costumer. You must also market and design your product appropriately, rather than simply relying on how “great” your product is.

Over the years, many ambitious souls have created great technology, but they stopped there. To create a great product, you must also create the means to sell your product in a market that is amenable to your technology/product. You must create the infrastructure to efficiently build, market, sell, and distribute your product.

In an article by David Skok, from forentrepreneurs.com, there are a few more reasons why start-ups often fail. One big reason why start-ups fail is that they overestimate the market for their product. You must have a compelling value proposition (in real life, not just on paper) if you want to be successful. People must have a good reason to buy. Unfortunately, many entrepreneurs don’t research their business concepts thoroughly enough; instead they skip this step and launch their business and learn as they go.

Another reason why start-ups fail is that they underestimate how easy it will be to attract customers, even if they have a great product to offer. You must be able to acquire a new customer for less than the amount of money you will eventually glean from them through their relationship with you. In fact, innovative new products need very special customers who value the innovation. Time can be wasted when it is spent with prospective customers who don’t value innovation.

Lack of capital is a legendary cause of why companies, and especially start-ups, often fail to thrive. This may sound simple but even the best idea can be foiled by insufficient funds. The young firms just “run out of runway.” Sadly, the business concept can be a great one but without cash to feed the idea, it quickly fails.

To create a strong, prosperous start-up, you must do your research and put in the time to make sure you have the proper resources and strategies to ensure success.

Published by CSUF Entrepreneurship

We teach, coach and lead the principled, cross-disciplinary practice of entrepreneurship. We believe that, through determined practice, leadership and team work, our students, faculty, clients, volunteers and alums can systematically recombine the new and the old to forge new ventures, create an entrepreneurial culture, and dramatically benefit our community.

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