7 Signs Your Startup Might Die, Taken From Startups That Actually Did Die
It is a well-known fact that many startups out there die often and fast. Almost 75 percent of startups fail in the period of five years.
Of course, it doesn’t mean you should give up before you even started your path of entrepreneurship. Every business is different and the way it will be developing depends on various factors.
It is true that sometimes cutting the costs can be the best option for you as you are giving yourself time to start a better business that has more prosperity.
The thing that makes you a winner is the possibility to recognize the futile endeavors and abandon them… but it doesn’t always work that way because you’re rarely alone in it.
Entrepreneurship enjoys a very good public reputation. The figure of the entrepreneur enjoys all the social and media benefits these days.
It’s a heroic calling of the young creative who, without resources but with a brilliant idea and hard work, insists on carrying out innovations and changing the world.
The legend is also imbued with impacting the national country’s economy and society in a positive way, thus becoming an example for everyone.
All that been said, it is not that easy to leave the ship if you already invested a lot in it. There are tons of pressures from society and your own expectations from yourself.
You have spent a lot of money and time funding your startup and it is counterintuitive to give it all up easily.
You should always try to fix the problem and ask yourself questions that will help you get back on the market as fast as humanly possible.
Watch out for these signs taken from startups that died:
1. NEGATIVE ROI IS WHAT IS DROWNING YOUR BUSINESS
Essentially, running a business can be very simple, but you must be willing to spend money in order to earn it.
The ideal situation would be to earn more than you can spend. Unfortunately, many startups are failing because they are not obtaining a reasonable profit.
Sometimes, high costs and cheap products can create negative ROI (Return on Investment).
Another thing is the administration of finances (you didn’t think about the number of people you will employ and several products bought before your business even started).
It was the company that developed an autopilot system for programming drones to follow certain routes for collecting data. Their CEO said that this company was a good example of how business shouldn’t be run.
They have spent too much money to find adequate products on the market. They didn’t think about the way to do it.
They just spent money without even thinking of how to expand their track and give corporate clients more time to discover how to use drones. If they have spent only a bit more time analyzing, Airware would have been alive.
There is nothing special about the fact that startups die every day. Many pieces of research show and prove this fact.
Many types of research show that there are a great number of possibilities that your startup fails, but you already knew that. It’s not rocket science.
Every business is different and staying alive on the market of startups depends on various factors.
Some of the factors can be the quality of ROI, the demand for the product on the market or how you are changing regarding the demands and needs that the market has.
It is important to serve as many people as possible when it comes to business because the bigger the market, the more chances there are to make money.
In reality, the more particular your niche is, the easier it will be to advertise the market and sell your products.
The fact that your business is capable of serving multiple markets does not mean that you should provide multiple services, especially not in the initial phase.
It is much easier to start a successful business in a narrow niche than to compete with companies that are many times larger and more developed than you.
2. FAILURE TO SPECIFY YOUR TARGET AUDIENCE AND GOALS
It would be great if you could make a business that everyone will like.
The bigger the market, the bigger is the chance to earn more money, right? Well, yes, but, it’s not always as simple as that because you can’t always fit all sizes.
The truth is, the smaller your target consumer group is, the easier it will be to advertise the product and advertisement is basically selling it.
Here’s something to help you understand how to hire smart startup marketers in order to avoid failure.
It is not a must to be present in various markets. It is enough to have your public that will buy your products. It is good to have a limited niche and compete in the specific field you selected.
Gowalla, a startup from social networks that was founded in 2007 had a goal to help people share beautiful moments and stories… and to earn money of course.
Unfortunately, it died quickly as it competed desperately with Facebook, which finally bought Gowalla for $ 3 million, which is $ 5 million less than the company had risen in venture capital.
Failure to specify your target audience, consumers and goals can bring your business down so be wary.
3. OUTDATED PRODUCTS THAT SHOW DISREGARD TOWARDS THE PRESENT DEMANDS OF THE MARKET
In the long run, the biggest problem that comes from not meeting the demands of the market results with loss of clients.
For a client, realizing that a certain product is not available anymore can be frustrating. Well, the same goes for outdated products.
People who like your products want them to be available all the time, but they also want their products to be updated and to follow the trends.
That is why you should always be aware of the demands and be very diligent with your inventory and guarantee availability.
You should be a quick learner to keep up with the fast-paced modern society and its innovations. When you stop learning, your business is starting to fail.
It was the case with Tome Blockbuster, a massive company that failed overnight. The reason is that this company didn’t go with the flow, they didn’t comply with market demands and they began to lose revenue.
It is one of the biggest obsessions – and the most logical – of any company: to get customers (or users that, even if indirectly, generate income).
However, if you are undertaking on the internet and what you offer is a service that your users may need with some frequency, surely you are familiar with a simple concept: that of a recurring customer.
And losing recurring clients is rarely a good symptom, so if it happens to make sure to run analysis and change the way you do business ASAP
Getting occasional or one-time clients is a fairly simple task (you can even pay for them, and you know that it is not very expensive), but if you increase the number of clients that can leave at any time and start losing those who were recurring… you’re in for a rough ride.
It’s a good thing to contact your once-recurring clients that now seem to have lost interest in your services and make a survey in order to assess the reasons why it is so.
When you understand your clients’ motives, you will easily think of counter-measures and save your startup from failing. Consult with your clients as well, some of them may have wise suggestions for you.
As always, the whole thing is about paying attention to your client’s demands, needs, and expectations.
4. DO NOT CREATE A DEMAND FOR A SOLUTION
In general, new companies advertise the perfect solution to some kind of problem. Then they continue talking about how their services will help revolutionize the chosen market and eliminate the problem.
All this is fine, but, when planning your start, you must ensure that there is a solution to the problem you want to address.
Even though it’s a startup you’re managing, you must think big and opt for a universal problem or one troubling the bigger part of the consumer population.
If only a few people experience the problem that your products or services promise to solve, then almost no one will use your services – it’s that simple.
You’ll want to avoid what many startup founders are doing, which is creating a demand for a solution to a small problem.
What you should be doing, is as mentioned above, finding a solution to a problem with a large amount of pre-existing demand.
Unless you are a massive company, your chances of creating demand are very slim and even if you have a lot of money at your disposal, you will waste it by pressing something that nobody wants and your startup will die.
An example of where a startup did not have enough demand for its solution can be found in the now disappeared company Raptr.
They were a startup of PC games that allowed their customers to optimize the performance of their system without affecting the quality and efficiency of their systems.
However, very soon after its launch, they finally failed in 2017. The reason for this was published in a Raptr statement.
This is an example that a startup has not focused its business model on a problem with sufficient demand for a solution, but the problem was incredibly niche and, finally, other PC gaming companies were able to offer similar and better services.
Raptr and the way it worked was no longer convenient for their customers, they weren’t even the best option.
The market is changing and the small businesses have to adapt to the changes that the market implies. If not, the slow-paced startup will survive long enough to see how another business is taking its place.
5. FORGETTING THE REASON FOR FOUNDING THE BUSINESS IN THE FIRST PLACE
The representative for this sign of failure is Theranos, a blood-testing company that failed. The purpose of this company went beyond selling shirts and put together a solid content marketing strategy.
It was a startup for technology related to health care.
The value of the company once was more than $10 billion and it was a company that seemed promising in the industry of blood analysis.
Nevertheless, the progress of the company never happened and it was declared the absolute fraud.
The main reason why this startup failed is that, at some moment, the parts of interest forgot why they started a business first.
They started with lies, and one small lie pulls another one and another one. That is how the road ends.
Maybe they started with the desire to help others, to create innovative products, to make the world a better place.
However, it seems that their motivation wasn’t pure. Maybe you can achieve success without having pure motivation, but you have to put that much more effort into specifying your goals and methodology.
6. LACK OF INCOME
Quixey, a search engine that was able to retrieve any information hidden in apps, died in 2017. As evidence shows, this startup didn’t succeed in finding its base and regular source of income.
In 2013, Quixey received a sum of $ 50 million from Alibaba. At the same time, Quixie signed a contract separately from Alibaba, and that made Alibaba a potential partner or client.
After some extensive corporate restructuring done from Alibaba, Quixey was faced with some disruptive changes. The startup now had to meet new weekly (instead of quarterly) product deliverables.
No one believed that Alibaba was delaying its end of the monetization contract. However, Quixey raised over $ 60 million funds led by Alibaba next year.
Somewhere along the 2016, Quixey assessed that they owed Alibaba about $ 37 million based in the commercial contract.
As for Alibaba, however, they did not believe that the terms of the agreement had been fulfilled.
It was supposed to be reconciled by two parties reaching an agreement whereby Alibaba will pay Quixey $ 10 million and provide a guaranteed loan of approximately $ 30 million.
The loan terms included a 2 years 18-month reimbursement and a settlement preference that effectively granted Alibaba a significant veto power over capital investments to come in Quixey.
By the end of 2017, Quixey dug $ 10 million from new shares but did they failed to raise enough cash to return the Alibaba’s full loan.
The startup hoped that their earnings will give them some time to hunt for a new great customer since the staff thought that the technology was ready for its primetime.
However, Alibaba refused to allow new external investments, which led to the demise of Quixey.
7. MARGINALIZING AND DISREGARDING THE FAILURE AT THE BEGINNING OF YOUR ENDEAVORS
It is hard to measure the seriousness of failure at the beginning. However, the failure of just one startup can affect more than just disappoint the owner.
Entrepreneurs tend to be very optimistic and ambitious regarding their possibilities for success. It is part of what keeps them in the face of tremendous adversity, and part of what makes them attractive to venture capitalists.
An entrepreneur can inspire other people with his optimism. +However, optimism and enthusiasm are not enough for you to be considered a businessman.
You need to gain experience and knowledge as well. One of the biggest problems is the velocity that one entrepreneur is going at, not realizing what is happening.
Of course, between the progress of the product, its sale, coordination of a team and daily tasks, the danger of your startup staggering may get too high. And the worst, no doubt, will be that you are not realizing it, because if you don’t realize it, how can you account for it?
Some signs are more than obvious. For example, you must see if your billing fails, if your current partners begin to leave you, if your business does not grow as fast as you expected or if you do not get revenue… All of these are factors that you will notice immediately.
APPENDIX: WHEN TO PRESS THE ACCELERATOR PEDAL AND INVEST BIG
What frequently goes wrong and makes one company crash is that the management did not achieve the next milestone before the cash ran out.
One of the most important things of the CEO is to know how to balance. When starting a business, the ship should be sailing slowly to save money.
There is no point to give the job to a big group of people and invest in marketing if the company is still in the process of developing until it satisfies the market needs. This is the common error that startups are making and that is the reason why most of them are burning very fast.
On the other side of the coin, it comes a moment when it’s finally obvious that the business had proven itself on the market, and this is the time when you should press the accelerator pedal.
It is hard when you are CEO for the first time and you run into this kind of problem.
It is a long way until you come to the end of the road. Suddenly, you need to press a switch and start investing aggressively before receiving income.
This may involve hiring multiple vendors per month or spending considerable sums on Search engine marketing. That change can be very contradictory.
Business magazines and specialized bookstores are full of history of business successes, with many examples of the way forward to turn a simple idea into a reference company.
However, entrepreneurs who end up being subject to analysis and admiration are the exception to the rule: every day a handful of startups die, with more or less noise.
And those battalions may be more exemplifying than successes. The main reason for the failure of startups is clear: they simply do not offer the product or service that the market demands, a reason that a big percent of entrepreneurs claim for the closure of their company.
These companies may have done a great job, but the consumer does not seek to reward the most competent entrepreneur with their money but to solve a need.
Along with financial reasons, others are more linked to corporate governance, business chemistry or mere human nature.
Thus, having an inadequate team is, according to the analysis, the great cause of mortality of founders of startups. The conclusion is clear: there are many ways to make mistakes, almost as many as to succeed. In both cases, interesting lessons can be drawn.
Always keep in mind that signs that your startups may die are not just symptoms of it crumbling to dust. These signs are reasons you may fail and you should address them ass such and think of optimal counter-measures.
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