Why Most Start-ups Fail ?

We see a deluge of Startups coming everyday. Most of them follow a business model, wherein

  1. A group of youngsters come up with an idea,
  2. Present That idea to a VC (Venture Capitalist) to get Funding.
  3. Use the VC money to offer discounts to gain customers at a fast pace.

Most of the Startups you see, grow their business by offering discounts as compared to your neighbourhood vendor.

But they are doing so, at the cost of burning VC money. They are incurring huge losses. Interestingly, many a times their purpose is not to run the business. Most of them just want to build customer database, sell away the business to someone and run away.

The reason for failing is very simple. They are not gaining customers because of better quality of products or services. They are gaining customers by offering artificial discounts, which cannot be offered lifelong.

The day they remove discounts and start offering at market price, they start losing customers. Their only hope is, your neighbourhood vendor doesn’t survive till that time, so that they can monopolize.

Now the question is, whether this situation will be desirable for customers and investors.

Sane Customers and Investors will always look out for businesses that follow a sustainable business model.

Other than this, there are few more reasons, why most of these Startups fail ?

  1. Chaar Din Ki Chaandni : Their importance grows during particular crisis situation (Example Demonetisation, Lockdown etc). But once things are normal, their importance diminishes.
  2. No Customer Service : Many of them dont really bother about serving their customers well. This is because they see new customers coming in every day. This ignorance to customer service deprives them of loyal customers.
  3. Backstabbing the Customer: Some of them try to lure customers by offering freebies or low costs. But behind the scenes, they sell the crucial data of the customers which results in fraudulent transactions. This bursts their image overnight. Most of the discount brokerage houses fall in this category.
  4. Copy Cats with No Sharpness: Most of them just want to copy someone else and try to gain customers by selling at loss. But they do not have any competitive edge, and thus they fail.
  5. Doing it Just for Fun: It sounds counterintuitive, but many of them DON’T WANT to build a successful business. They just do it for thrill at the cost of VC money.
  6. Looking For Shortcuts: Some of them want to be an overnight success. There are companies who have become successful over 10-15-20 years. But if you look for shortcuts, you are most likely to fail.

It is definitely encouraging to see that the youth of India wants to become entrepreneurs. We need more entrepreneurs in the country. But to become a successful entrepreneur, you need some basic skills, a long term mindset and proper guidance. It could be a good idea to look out for an entrepreneurship mentor who can handhold you in your journey to build a successful business.

We look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP, AFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author)


#Nidhi Investments


Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert. He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com . He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

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