What Makes a Startup Succeed or Fail?

Not a day goes by without the popular press talking about the exploits of some startup– Artificial Intelligence this or blockchain that.

These stories are often about successful startups from around the world in entrepreneurial ecosystems in Silicon Valley, Shanghai, London, Tel Aviv or Bangalore.

Take the Indian startup ecosystem for instance. According to Government of India’s StartUp India Hub data,

  1. India has the 2nd largest ecosystem in the world
  2. India is expected to witness YoY growth of 10-12%.
  3. India has over 20,000 startups with 3-4 tech startups being born every day!  

Such stories are, of course, very exciting to read about but they often hide an important reality of startups – most of them will fail – in fact, 90% of them fail. A survey conducted in 2016-17 found that despite India’s entrepreneurial strength, as many as 90% of startups fail within the first five years.

So, what are the factors that contribute to the failure of a startup?

  • CB Insights conducted post-mortems of 101 failed start-ups and identified 20 reasons for their failure. The top 3 are: no market need (42%), ran out of cash (29%), and not the right team (23%).
  • Bill Gross, founder of Idealab studied 100 companies and discovered that a startup’s timing accounted for 42 percent of the difference between success and failure. Team and execution came in second, and the idea, the differentiability of the idea, the uniqueness of the idea came in third.
  • Other reasons for failure include lack of innovation, failure to hire right kind of people, inability to raise funding, and lack of adequate mentoring.

While a study of 90% of the startups that failed can reveal reasons for failure, let’s look at 10% of the minority who do succeed. There emerges a recurring pattern with respect to the underlying themes for success. At Capria VentureBasecamp, we call this the Critical Success Elements for Entrepreneurs. These are various business elements that need to work together in a well-balanced and orchestrated manner to ensure that the startup moves forwards through its different stages of growth.

These Critical Success Elements are:

  1.    Roadmap
  2.    Team and Execution
  3.    Problem
  4.    Lovable Product
  5.    Customer Experience
  6.    Market Opportunity
  7.    Business Model and Unit Economics
  8.    Go to Market
  9.    Traction and Scale
  10.   Sustainable Differentiation
  11.   Sustainable Systems & Risk Management
  12.   Equity and Funding Strategy

A startup that is able to focus on becoming a ‘ninja’ at each of these elements has a better chance to create a viable, fundable business. The key is to build on these elements in parallel and not focus on any one element at the cost of another. After all, what are the chances that you can scale to multiple market segments if you don’t have enough funding or the right marketing team? Or, what’s the point of developing a great feature-rich product, without the ability to sell it to paying customers? Internet gaming company, Sharkius, rode on the Facebook gaming wave and showed great initial success earning upto $80,000 in revenues per month with more than 3 million users. But as competition increased and the startup grew, the management floundered in building the right team and bridging the big gap in their marketing expertise. With a great product and engaged customers, the startup folded. Another startup – Walnut – that offered moving services, had to call it a day, when their superior customer experience and high Net Promoter Scores couldn’t boost their unit economics from negative to positive.

That is exactly the startup success thesis that we follow at Capria VentureBasecamp – it all starts with identifying a great problem to solve. The VentureBasecamp team has built a program leveraging its cumulative 70+ years of experience in creating and building 200+ startups. During the program, you will experience time tested methods to identify the right problem to solve, build a solution that customers will love and pay for, develop sustainable differentiation and refine unit economics to create a viable, growing business. Through action-oriented digital learning courses and action-packed workshops, you will be become a VentureBasecamp Startup Ninja.

A successful entrepreneur when asked about the secrets to startup success, said “Find the right problem to solve, understand your customer deeply and then EXECUTE.”

So, what’s your startup’s  success mantra?

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