"Nine out of ten startups fail in their very first year of operation." Not only this, but more than two-thirds of them never deliver a positive return to their investors. Now, as an entrepreneur, you might have come across these stats at some point in your life. But the trivial point to be questioned is - Why do so many startups end up disappointingly, and what can we learn from these failed startups?
1. Lack of innovation
Let us start with a simple question - How do you build a startup?
Indeed, you don't wake up one fine morning only to quit your job and create a copycat model of an already existing startup!
A sane person would identify a problem and create a startup as a part of its solution. In other words, startups gain recognition because they offer innovative solutions to human problems. Startups prosper because they have something unique to offer; Something that has not been on the market yet. And when they fail to do so, they lose their competition to well-established companies.
2. Failure in identifying the suitable customer base
No matter how exceptional the quality of a product is, if the startup fails to identify a relevant customer base, it is bound to fail.
When a particular startup targets a specific audience, it reduces its competition and the size of the market they step in. As a result, it helps them to evaluate the return on investments. But, an erroneous target audience leads to fewer sales and an inflated cash burn rate.
For instance: Askmebazaar offered listings of all businesses in the market on its platform and raised a seed capital of $300 million. Their target audience was people living in Tier 2 cities like Kanpur, Banaras, Kota, etc. The only problem was that they offered so many services like AskmePay, AskmeGroceries, and many others that their users were often confused. This confusion became a barrier for Askmebazaar to generating profits. Later the startup had to wind up due to capital deficiency.
3. Negative brand image
Do you remember how Amazon could tap the e-commerce market in India despite the presence of our desi brand- "Flipkart.” Yeah! It was due to its niche customer service.
In its initial phase, a startup consumes most of its resources and time in marketing. But, once it gains some recognition in the market, it becomes harder to sustain the reputation gained through years of hard work. One wrong tweet and they lose all their investors and audience base.
Good brand value establishes trust and builds networking in the market, which results in increased revenue. Therefore, maintaining a robust and positive online presence is critical, which begins with harboring a healthy, respectful, and friendly workspace.
4. Not up to the mark service
Before understanding this point, answer a simple question- What aspect do you look for while ordering food online from a new restaurant? Well, apart from checking its menu, you scroll down to check its ratings and reviews and then decide to give it a go!
Customer feedback is a marker of the company's excellence and reputation. They leave a massive impact on future clients as well. Often, Indian entrepreneurs assume that a cheap solution is the best solution for their clients. As a result, they stop focusing on their products, leading to a negative feedback loop among their consumers. Poor product service weakens consumer relationships, spoils brand value, and causes hefty financial and operational costs.
For instance, Foodpanda was backed by Tencent and raised Rs 400 crores. It connected customers with restaurants, but today it is not in service. Wonder what went wrong?
It was due to the poor customer service. The restaurant aggregator lacked to properly track orders and set up a link between both parties. There were many instances when customers complained of wrong orders. On receiving customer queries, Foodpanda failed to deliver their requested order on time.
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