India has the one of the largest ecosystem for startups, yet majority of Indian startups fail within the first 5 years of their establishment. Now the question remains why?
While there are various reasons for the failure, here are few points worth mentioning.
Many startups are giving unrealistic discounts to attract customers. This leads to more investment with low profits. Such kind of startups will more likely to run into losses, which results in shutting down. While everyone enjoys discounts, unrealistic discounts can lead suspicion and eventually losses.
Many new businesses are imitating successful startups. Key idea of success for a startup is not the copied idea but a fresh idea and the willingness to execute it. A me-too startup will less likely to succeed.
Most of the failed startups lack sustainable business model. Some startups have no clear vision. They postpone profits to next year. Such kind of business model is not viable in the long run. Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff. Established businesses should regularly update their business plans or they'll fail to anticipate trends and challenges ahead.
Some sectors are overcrowded. For example, food delivery startups are way too many to survive. That is why most of the food delivery startups in India like ‘EatFresh’ went into losses.
According to a survey, 77% of venture capitalists think that Indian startups lack innovation or unique business models. A study conducted by IBM Institute for Business Value found that 91% of startups fail within the first five years and the most common reason is – lack of innovation.
Although India is said to have the third-largest startup ecosystem, it doesn’t have meta-level startups such as some of the big names like Google, Facebook, and Twitter. Indian startups are also known for replicating global startups, rather than creating their own startup models.
Among the most innovative Indian startups would be startups like ChaiPoint, Ola, Saathi, and Swiggy, according to a list of 50 most innovative companies in the world.
How can startups avoid this?
Innovation in business helps in numerous ways: beat the competition, stand out from the rest, helps solve problems easily and increases productivity. Here are a few points that startups must consider:
Avoid emulating existing successful global startup ideas in India without proper research and understanding of the Indian market. Startups need expert technical and innovation talent.
Think about the long-term sustenance of the idea before venturing into ideas that are trending.
Find the right resources to drive the startup with innovation.
A large number of startups fail for the simplest reason – the consumers have no need for its products. Does your product provide value to consumers? Are there consumers for your product?
Is your product aligned with the innovative ideas that your company is based on? A lot of times startups attempt to quickly develop products that have no demand or try to expand the market for a product.
How can you avoid this?
Gain an in-depth understanding of who your customers are and what they feel about your product.
Find new customers via word of mouth before jumping into creating expensive marketing plans.
Establish a relationship with your customers.
You can’t please everyone, nor should you try to.
With the startup boom, everyone wants to utilize the opportunity, but only a few are succeeding. At the starting stage of startup boom, there was a dearth of experienced mentors and trainers. With the growing expertise on startups, and with the increasing government support, success rate of startups is more likely to increase in India.
Comments