By Rushan Ziatdinov
Startups, to provide a quick definition, are pioneer companies designed to grow fast. These companies aim to launch and introduce their name into the market, with the advocacy and goal of developing a unique product or service that is the brainchild of utter innovation to which customers will be equally attracted and desirous of.
More so, startups are meant and aimed to serve as solutions for currently existing products and services and their shortcomings by disrupting traditional ways of thinking and doing business for different companies and sectors, as stated by Baldrige and Curry in a Forbes article in 2022. As a matter of fact, there are many startups in different industries that have earned the title of "disruptors."
Across the globe, a large number of startups get on their feet each year. Of course, despite countless bold ideas being brought to life, not all will prevail and, sadly, many of them end up failing. In April 2021, one of the most valuable startups in the global scheme was Ant Group, which was previously known as Ant Financial, a Chinese tech company, as noted by Statista.
In terms of countries, CEOWorld observed in 2021 that the United States remained the top startup-friendly country in 2021, with a total score of 92, followed by the United Kingdom with a score of 91, Canada with a score of 90, Israel with a score of 89, and India with a score of 88. South Korea was listed 19th, just below Russia.
As mentioned previously, many startups are bold enough to launch, but not fortunate enough to continue operating. The question is why so many startups fail. In fact, Eisenmann noted in a Harvard Business Review article in 2021 that two-thirds of startups are unable to deliver a good return to their investors for the following two reasons:
A startup can have good ideas, but bad bedfellows. Talent and determination along with several other nice things are not enough to keep a startup going. Rather, other elements are also important; strategies, partners and investors can make or break a startup.
Startups also fail because of false starts, which is the case when entrepreneurs adopt a mere portion of the startup canon. Many entrepreneurs launch minimum viable products (MVP) to gauge the reactions of customers to avoid wasting time producing something nobody wants. However, in this way, they waste money on MVPs rather than knowing the demands of customers before they begin. Simply put, the team behind the startup must understand the significance of researching customer demands.
The 10 most common reasons for startup failure were also mentioned by CBInsights, including: problems with capital, no market need, losing in the market competition, a flawed business model, issues with the law, cost matters, a flawed team, untimely release of the product, bad product quality, conflict with investors or team, flawed moves and inconsistency in general.
Some common reasons for startups failing mentioned by Bryant in an Investopedia article in 2020 are money running out, advertising in the wrong market, bad partnerships, bad marketing and lack of expertise. Startups running out of cash can be explained simply through cash no longer coming in, either through irresponsible sales management or lack of sales in general.
In contrast, a startup in the wrong market can happen when the team behind it tries to include everyone as their target market. A startup, or rather any business, in general, should have a select and specific audience whom they wish to attract and cater to. In addition, for an efficient and effective partnership to occur within a startup, a concise business plan stating the responsibilities of each respective partner is required so that the business processes will proceed smoothly and tensions between the parties will be avoided.
Startups should also invest in marketing campaigns since this is also a significant factor in determining their success. For a startup to prosper, entrepreneurs should be extremely knowledgeable about the particular market and audience at which they are aiming. In that way, they will truly understand the ways in which the market operates.
Because startups are statistically more likely to fail than succeed, universities must educate the art of startup management in a comprehensive manner. This strategy should include a look at the most common reasons for startup failure and how to avoid them. Furthermore, universities should devote more time to system simulation, which allows for a thorough examination of a company before it hits the market. Factors like a lack of investment can be easily incorporated into simulation models of the systems under examination.
Rushan Ziatdinov (ziatdinov.rushan@gmail.com) is a professor in the Department of Industrial Engineering at Keimyung University, Daegu. In 2010-2011, he was a postdoc in the College of Engineering at Seoul National University.
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More so, startups are meant and aimed to serve as solutions for currently existing products and services and their shortcomings by disrupting traditional ways of thinking and doing business for different companies and sectors, as stated by Baldrige and Curry in a Forbes article in 2022. As a matter of fact, there are many startups in different industries that have earned the title of "disruptors."
Across the globe, a large number of startups get on their feet each year. Of course, despite countless bold ideas being brought to life, not all will prevail and, sadly, many of them end up failing. In April 2021, one of the most valuable startups in the global scheme was Ant Group, which was previously known as Ant Financial, a Chinese tech company, as noted by Statista.
In terms of countries, CEOWorld observed in 2021 that the United States remained the top startup-friendly country in 2021, with a total score of 92, followed by the United Kingdom with a score of 91, Canada with a score of 90, Israel with a score of 89, and India with a score of 88. South Korea was listed 19th, just below Russia.
As mentioned previously, many startups are bold enough to launch, but not fortunate enough to continue operating. The question is why so many startups fail. In fact, Eisenmann noted in a Harvard Business Review article in 2021 that two-thirds of startups are unable to deliver a good return to their investors for the following two reasons:
A startup can have good ideas, but bad bedfellows. Talent and determination along with several other nice things are not enough to keep a startup going. Rather, other elements are also important; strategies, partners and investors can make or break a startup.
Startups also fail because of false starts, which is the case when entrepreneurs adopt a mere portion of the startup canon. Many entrepreneurs launch minimum viable products (MVP) to gauge the reactions of customers to avoid wasting time producing something nobody wants. However, in this way, they waste money on MVPs rather than knowing the demands of customers before they begin. Simply put, the team behind the startup must understand the significance of researching customer demands.
The 10 most common reasons for startup failure were also mentioned by CBInsights, including: problems with capital, no market need, losing in the market competition, a flawed business model, issues with the law, cost matters, a flawed team, untimely release of the product, bad product quality, conflict with investors or team, flawed moves and inconsistency in general.
Some common reasons for startups failing mentioned by Bryant in an Investopedia article in 2020 are money running out, advertising in the wrong market, bad partnerships, bad marketing and lack of expertise. Startups running out of cash can be explained simply through cash no longer coming in, either through irresponsible sales management or lack of sales in general.
In contrast, a startup in the wrong market can happen when the team behind it tries to include everyone as their target market. A startup, or rather any business, in general, should have a select and specific audience whom they wish to attract and cater to. In addition, for an efficient and effective partnership to occur within a startup, a concise business plan stating the responsibilities of each respective partner is required so that the business processes will proceed smoothly and tensions between the parties will be avoided.
Startups should also invest in marketing campaigns since this is also a significant factor in determining their success. For a startup to prosper, entrepreneurs should be extremely knowledgeable about the particular market and audience at which they are aiming. In that way, they will truly understand the ways in which the market operates.
Because startups are statistically more likely to fail than succeed, universities must educate the art of startup management in a comprehensive manner. This strategy should include a look at the most common reasons for startup failure and how to avoid them. Furthermore, universities should devote more time to system simulation, which allows for a thorough examination of a company before it hits the market. Factors like a lack of investment can be easily incorporated into simulation models of the systems under examination.
Rushan Ziatdinov (ziatdinov.rushan@gmail.com) is a professor in the Department of Industrial Engineering at Keimyung University, Daegu. In 2010-2011, he was a postdoc in the College of Engineering at Seoul National University.
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