The bubble of Indian start ups is already burst. Not only weaker firms like Yep Me and PayU started layoffs of employees but also strong firms like Snapdeal. Many have already closed their shops; well known are TinyOwl, AskMe, and Zupermeal. It’s very interesting to note that 78% of role in failure of start ups is played by only 3 factors: 1.Product is not attractive, 2.Improper Team/Poor Management, and 3.No Funding/Lack of Capital. I have tried to analyse all the factors of failure in details as follows.
Product is not attractive (33%): This is the top most factor behind the failure of start ups. If product/service is not as per the requirement of customer/market then it fails to attract them. The firm failed because the product was not fit, even though the product was unique, management was good, and there was not much competition in the market. The best examples are: HouseThis, 99dresses, OpTier, MyManual, etc.
Improper Team/Poor Management (25%): Success of a company cannot be imagined without a smart team and management. I believe, this factor must be responsible at least 50% of all; because 3rd, 4th and 5th major factors depend on this factor. Because of this factor the teams will not perform and deliver properly. The outcome will be poor quality of product/service, which will obviously lose the competition in the market, and automatically the firm will not get funding from investors or capital from banks. The best examples are: Bluebird, RateMySpeech, etc.
No Funding/Lack of Capital/Bankrupt (20%): A third major factor that start ups fail is because they ran out of cash. A key role of the CEO is to manage the cash in a way that it will carry the company to the next milestone, which can lead to a successful financing or positive cash flow. The management role is very important to get the job done from employees to achieve the next milestone. Poor management fail to achieve the next milestone and hence company fails to get fund. The best examples are: Circa News, GuGo, Patterbuzz, Admazely, etc.
Unable to compete with market leaders (7%): Many companies fail to compete with market leaders because they fail to develop a product that meets the market need, or they fail the quality of product and the service. This depends on management to make and execute the best strategy behind the product, its cost, quality, and the marketing strategy. Example can be of Argyle.
Lack of Business Model/Domain Knowledge (5%): Kodak is the good example of a failure due to lack of business model, in spite of the good product and good quality service. The value of product/service entirely depends on business model; therefore revenue generation and profit-loss will depend on it. It determines the future of a company in long run. The best examples can be Kodak, Britannica Encyclopedia, EverythingMe,
Others (10%): There are lots of other factors responsible for the failure of a start-up like: Bad location, Over-expansion, No website, Ignoring customers, more number of founders, leadership without prior experience of a start up, HR and company policies, employee satisfaction, not hired right talent, company working culture, etc.