5 Reasons why more than 90% of Indian Startups Fail in First 5 Years.

Source: placementmagazine

The last couple of decades have witnessed a huge advancement and increase in the number of startups and business opportunities in India. No doubt it has caused a vast positive impact on the society and market conditions. But at the same time there is a sharp fall of more than 90% of Indian startups in the first 5 years.

Approximately 200 startups closed down in 2016 as per reports. The IBM Institute for Business Value jointly with Oxford Economics has done a survey and found out that the lack of a proper innovation in the field of new business market, was the major reason for the failure of a startup in India.

Hand draw business sketches over grey background. Business idea concept

There are some major reasons for this. Let’s see those:

  • Funds: Funding is one of the major challenges that these companies face. Even though they kick start in a very promising way, but eventually it dies off within no time due to lack of funds. Since few people quit their jobs in the hope of earning more from the business but without a proper defined plan. About 65% capitalists believe in this.
  • Right kind of people: As much as funding is required, so also the right kind of people to run the startup is also required. 70% capitalists believe this point as per the report. To expand the business, troubleshoot the problems, understand the requirements, everything needs to be handled very maturely and wisely.
  • Adequate mentoring: Lack of adequate mentoring leads to many improper decisions and incorrect steps taken which lead to eventual decline of the company.
  • Inexperienced leadership: 45% of venture capitalists believe that the presence and guidance of experienced leaders is very essential for the success of any startup.
  • Innovation and uniqueness: Many startups are prone to mimicry and lack unique and innovative ideas. If the business is providing product or service which is already present in the market in a same or better way then there’s no point in making another duplicate model of that.

Some of the examples are Indiaplaza – which came much earlier than Flipkart with the same concept but not with a great looking website and also might be the time when the market was not ready or rather sceptical to buy stuffs online. This was 1999. Next is ‘guruji’ – the Indian search engine, which just came up and got vanished away in a little over 5 years times. Came up in the year 2006 but the decline started off in around 2010 and closed down in 2012. In this only the web and images option were available as compared to other search engines. Few of the other examples are TalentPad – hiring platform for employers, Townrush – hardware startup in IoT, Langhar– home cooked food delivery and many more.

If all these points mentioned above are handled and taken care of in a planned manner and innovative ways are brought in to create a platform or company that will not only benefit the business but also its customers, then there will be a decline in the percentage of startups closing down.

Article by Somdutta.

5 Reasons why more than 90% of Indian Startups Fail in First 5 Years.


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