Why Start-Ups Fail: A Marketers Perspective

It’s easier than ever before to start a business. While a decade ago you needed a good deal of starting capital and a pretty strong idea to convince the bank to loan you some money, nowadays all you need is a laptop and the semblance of a decent idea. If you’re planning on becoming the next Mark Zuckerberg or Richard Branson, however, prepare yourself for a shock.

It’s not just about easing yourself into a particular eco-system and pressing the ignition button.

For every successful entrepreneur who makes it big, there are literally thousands who have fallen by the wayside. India may well be a growing hub of innovation and enterprise but that doesn’t mean it’s rising number of entrepreneurs are guaranteed success.

There are some pretty significant reasons why you may be going to fail the moment you decide to start your business.

Ogilvy’s 4 E’s state that the most important aspects of creating a good business are:

• Experience: You need to have some business acumen and experience. If you jump straight into the water without learning to swim, you’re likely to sink.
• Everyplace: Consumers have a much wider range of ways to access products or services. If you’re business isn’t reaching these, it’s failing to reach customers.
• Exchange: While price may still be important, the value of what you are exchanging for that hard-earned cash is important. Most failing entrepreneurs don’t know the value of their own product or how to leverage its potential.
• Evangelism: To beat your way past the competition you need to be an evangelist, i.e., you really must love and believe in your product or service. If you don’t believe in it, how can you expect your consumers to?

The 4 C’s tell a similar story for entrepreneurs with choosing the right market, choosing the right model, choosing the right team and choosing to be consistent. There are variations on this theme but they still don’t go onto tell the whole story and why many businesses are failing in India.

One of the major reasons that startups falter is entrepreneurs themselves. Far too often they don’t have a clear focus on what they want to achieve apart from being the next big kid on the block. That’s all well and good, but you’ll almost certainly need more. Essentially, if you don’t have a good idea and a way to engage your potential consumers, you’re putting yourself up for a catastrophic business failure.

We all think we can be entrepreneurs. That’s what the web tells us. That’s what the tech news tells us. Here’s the reality – you really do need to build up some experience. The problem is that many budding entrepreneurs nowadays have zero business acumen. Most successful entrepreneurs have had their share of failures or have worked in industries that have given them a great insight into the world of business. Call it the school of hard knocks if you like but you don’t just fall out of college or university and find that you are good to go.

One major part of the 4 e’s applies to the modern Indian entrepreneur. The eco-system. A product succeeds when it adds value to life or disrupts the status quo in such a way that it captures the public’s attention. Many failed entrepreneurs care less about creating their own, innovative eco-system as they are trying to fit into an existing one. If you want to be a truly successful entrepreneur you generally have to forge a brand-new path.

Finally, entrepreneurs who fail tend to create businesses around a product idea rather than addressing a need that exits. They’re also focused on exits or trying to game the system – in other words the end result is on their mind rather than the journey.
The food delivery business in India was huge for a while but a lot of these companies finally went bust. They failed because they were essentially ‘buying’ customers and hoping that creating scale and becoming big enough would be enough to keep them going. Ed tech has also encountered problems trying to survive in a market where a lot of stuff is actually free and one where it is quite difficult to differentiate between different products.

Offering a discount to get past the competition isn’t a solution that works in the world of ecommerce. Not if you want longevity. Putting yourself into an existing market space and hoping to succeed just because you are there is short sighted at best and prone to failure at worse. New entrepreneurs hoping to start up a business continually fail to recognise that consumers are looking for innovation. If price were the main issue, we’d be losing out to cheaper markets such as China.

It is important as an entrepreneur to not forget about your core customer base and go chasing dragons. Too many times we hear entrepreneurs talking about chasing magic dragon aka buzz words and metrics that investors throw at them and completely forget to address the needs of its customers.
It is oft remarket that the Indian start up scene is all about quantity not quality. The ecosystem as it stands is not focussed at delivering the quality that consumers are looking for. The recent churn being observed in India should serve as an awakening. The notion that you can throw money at a project and be successful without an idea what your consumers really want and how you are going to deliver it has been rudely dispelled by the number of significant failures. Again we need to only look back at the food tech businesses that failed spectacularly at this.

One of the key success for successful start-ups is the ability of the entrepreneur to stick it out and have the ability to hustle and take things to the limit. They seem to forget that Rome wasn’t built in day, therefore it’s no surprise that many entrepreneurs, especially those just out of college, fall far short of this criterion. They’re too busy dreaming about being the next Richard Branson rather than getting the experience that counts.