The start-up culture in India is no different from what is happening globally except for the fact that it’s not evolved mainly due to lack of supporting infrastructure. The failure rate is quite high because a lot many are ‘me too’ ideas trying to address the same market but in a different geography.
The start-up culture in India is no different from what is happening globally except for the fact that it’s not evolved mainly due to lack of supporting infrastructure. The failure rate is quite high because a lot many are ‘me too’ ideas trying to address the same market but in a different geography.
The problem arises when start-ups try to scale up outside of their comfort zone either to impress the investor community – or to raise funds and there is a need to expand in the market.
US based firm CB Insights surveyed 101 start-ups last year and the results were tabulated by www.statistica.com. The results highlighted some of the key reasons why start-ups fail.
The top few reasons cited included – No market need (42%), Ran out of cash (29%), Not the right team (23%), Get outcompeted (19%), Pricing/cost issues (18%), Poor product (17%), Need/lack of business model (17%) and so on.
The reasons outlined by CB Insights are true for the Indian market as well though not in the same order and weightage. Most start-ups in India are just emulating others and hence fail miserably, unless they are backed by investors who continue to fund the failed business model in the hope that it gets acquired or merged with a larger entity. The approach not only helps investors gain a piece of the larger entity but also save their investments. However, it's the start-up that's at the receiving end and loses identity. Some of the stories that have played out in the Indian e-commerce and online food delivery space are clear examples of this trend.
Another factor where customers are ignored (14%) ,was at the ninth position in the survey results but if it’s looked from the Indian market perspective, I’d say that it is the key reason and will easily be in the top five for failure of start-ups here. While business ideas can be ‘me too’, learning from others mistakes, not repeating them and improvising further to offer a better customer experience is the possible key to success.
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