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Top Reasons Why Many Startups in India Have Failed

YoKart Chef11.21.2016
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The failing-startup problem in India has become a big issue in the startup ecosystem. As per statistics, majority of entrepreneurs fail while trying to establish their business. After studying failed startups in India, I have compiled a list of several major reasons behind their failure. From the lack of talent to changing market dynamics, these top reasons can become a nightmare for any entrepreneur who wants to start a new venture in the ever-changing Indian market.

Not Understanding the Needs of the Society

Most successful business ideas arise from needs of the society. Since high school, teenagers become a part of the competition to get the best college and eventually, the best job. Due to competition, most people spend countless hours in studies and disconnect themselves from society. The divide between the tech-driven lifestyle of millennials and lack of understanding for society’s demands contribute towards failing business models. The educational pressure is one of the many reasons that experts believe to be the source for lack of understanding between people and society.

Solution: Entrepreneurs should conduct in-depth market researches to understand the need of the society and then proceed to the product design phase.

Lack of fresh and Innovative Ideas

Almost every niche market in India is suffocated with multiple startups trying to provide solutions to the same problem. This calls for entrepreneurs to be inventive and push the boundaries using innovation to stand out. Due to competition, the urge to grab market share makes an entrepreneur vulnerable to mistakes by producing the wrong product.

Solution: Entrepreneurs need to analyze their business idea and think out of the box. An ideal example can be the number of startups in the ecommerce industry, but rarely anyone focuses on logistics based startup ideas, where the need is.

Make Your Innovative Startup Idea a Reality with Experts

Lack of People with Hands-on Experience

The startup ecosystem in India has a dearth of talent due to issues like brain drain. Due to the competition among startups, the idea of training a new employee goes right out of the window as time is a critical factor. Nobody wants to spend resources training the new crop when you can get experienced personnel. This has created a void of experienced professionals, who can contribute from the first day itself. By hiring amateurs, which most Indian startups do, they fail to provide a better product, which eventually leads to a startup’s demise.

Solution: Startups should aim to hire those people who share the same zeal to make the startup successful.

Limited Access to Funding

Entrepreneurs have to fight hard to get funding for their startups nowadays. To get started, they use their savings or take money from friends and family.Very few are lucky to get angel funding. Moreover, venture capitalists tend to finance only those business ideas that can provide a good return on investment. This results in majority of young entrepreneurs missing VC funding. As a result, most Indian entrepreneurs are not able to continue their venture due to lack of funding.

Solution: Entrepreneurs should reach out to multiple venture capitalists and know who is better aligned towards the goals of startups.

Lack of Understanding between Technical and Management Teams

There is a big difference between a technical graduate and a management graduate. For a startup to succeed, complete understanding is need between the two. The lack of technical know-how among management graduates and the lack of managerial knowledge among technical graduates is one of the common reasons behind the failure of startups in India.

Solution: Business process should involve meetings of the management team and technical teams on weekly basis to ensure a smooth workflow.

Offering very High Salaries

Startups in India face a serious shortage of talent pool. To bring experienced professionals on board, they offer high salaries to keep the startup in safe hands. However, offering high salaries to employees makes the startup eat into its resources. The shortage of funds leads to instability within the startup, which leads to bad decisions.

Solution: Startups should be policy driven and offer same salaries to team members. It should offer incentives for performance based work. Doing so will help manage the funding in an appropriate way.

Lack of Interpersonal and Soft Skills

Most entrepreneurs in India are found to lack interpersonal and soft skills. Due to poor communication skills, an entrepreneur increases the failure rate of his/her startup. The lack of such essential skills makes a startup not able to compete in international market. Also, entrepreneurs face a lot of difficulty in pitching their business ideas to a venture capitalist with poor communication.

Solution: Entrepreneurs can enroll themselves at personality development classes to improve their soft skills or hire an experienced person for business communication.

Not Able to Address the Issue of Scalability

Over one-third of Indian population is on the internet. Startups that have successfully built a product based on the needs of the society and are running profitably, will face the issue of scalability. In such cases, lack of awareness or no mentor-ship becomes the deciding factors behind a startup’s failure. Due to inexperience, entrepreneurs fail to understand the changing needs of their product’s growing consumer base.

Solution: Entrepreneurs should keep a close watch on the growing demand for their product and focus on response time and capacity planning.

Also Read: All You Need To Know About Ecommerce Product Pages

Unaware of Changing Market Dynamics

Market dynamics keep changing with new trends becoming outdated in no time. Before a startup knows what hit them, it is often too late to react and change the strategy. Such scenarios arise when a startup’s core team is unable to make timely decisions due to lack of industry insight, not conducting thorough research about the niche market, targeting a wide market segment, and more.

Solution: An entrepreneur should keep up with changing market dynamics to see a decline in the demand for their product and take necessary steps to run the startup profitably.

Planning to launch an ecommerce startup? Don’t rush and know these 8 things first.

The startups sector in India is maturing slowly and realizing its mistakes. The failure rates among startups are also on a decline as we take cognizance of the issue discussed above. To succeed in a dynamic market, you need to ask your queries to experts. To do so, share your startup related query by dropping a comment.

Author: YoKart Chef is an ecommerce guru and knows what startups need to thrive in a competitive market. Entrepreneurs & CEOs can count on YoKart Chef for valuable insights on latest ecommerce trends. Follow Yo!Kart on social media for latest updates Twitter, Facebook & Instagram.

Richa Gangwani says:

Nov 29, 2016 at 10:am

Thank you for sharing the main reason behind why startups fails in India.
This will be kept in mind for sure.

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