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11 reasons why startups fail at the idea stage

“Failure is a wonderful teacher. But there’s no need to seek out failure. It will find you.”

Jeff Atwood

The default state of a startup is failure and there are many reasons . It all starts with an idea. At this stage, it is most important to understand the problem in detail or the opportunity that you want to tackle. The primary activity is to gain market insights and to validate the problem. At this stage, it is also essential to find the right cofounding team.

Here are eleven reasons why startups fail at this stage.

Procrastination

Having looked at many wannabe founders, I have noticed that they do everything but build the business. This includes being hooked on to startup news blogs and taking part in startup events and pitching competitions. These things although are great for learning and networking, but can make you struggle to focus. At this stage, you need to focus on validating your idea.

A startup is not a hobby

Often entrepreneurs want to pursue their hobby and turn it into a business. This is usually hard. Because your hobby might not serve a big market and secondly, it could take time to become a big business. A hobby is something you like to do in your personal time, so when you turn that into a business, then you don’t like doing it as much as you used to.

Revenue also plays an important role. Can the business make money? Because you don’t run a real business until you get paid.

Dismissing your startup

It’s harmless if reporters and know-it-alls dismiss your startup. They always get things wrong. It’s even ok if investors dismiss your startup. They’ll change their minds when they see business growth. The big danger is if you start to dismiss your startup yourself. Frequently, founders don’t see the full potential of what they’re building.

Even Bill Gates made that mistake. He returned to Harvard for the fall semester after starting Microsoft. He didn’t stay long. But he wouldn’t have returned at all if he had realized Microsoft was going to be even a fraction of what it turned out to be.

Fundraising before you’re ready

There’s no good time to start networking with investors. But trying to pitch investors before you have done some research on the idea is a waste of time, and can also turn out to be risky. Investors receive thousands of pitches a year, they can only focus on a handful of startups in a year. So you want to be able to put your best foot forward and make sure you are well prepared when you enter a conversation with VCs or angels. Otherwise, you might have wasted a great opportunity.

reasons startup fail

“Building a startup is like jumping off a cliff and building a plane on the way down”

Having a derivative idea

If you look at the most successful startups, you will notice that they usually have one thing in common. It’s differentiation. Google, Amazon, Facebook, Netflix- all these companies differentiated themselves from the competition. Imitation generally works when someone copies a  successful idea from one country to their own country because the market has not yet been penetrated.

Choosing the right cofounders

A significant reason why startups fail is to hire the right cofounders and build a good team. Founders either hire best friends or partner with strangers. The key to building a good co-founding team is complementary skills, the ability to work together, and similar motivations.

Not doing enough research

Research is very important in the idea stage. However, many entrepreneurs rely on assumptions and beliefs rather than going out and doing proper research. In order to get validation, you need to go directly to potential users and customers. Remember that ideas are just hypotheses. The only way to see if the idea works is by entering the market and collecting real data and real prospects.

Dealing with uncertainty

In the words of Reid Hoffman, starting up is like jumping off a cliff and building a plane on the way down. Startups are a high uncertainty, high rewards game. It requires doing a lot of things right, starting from ideation to exit. And, even if you do everything right, there is still a risk of failing. But eventually, you won’t know what’s out there until you go out and seek the truth.

startup idea failure
Decision making assessments for startups

Thinking of too big an idea, especially at the beginning

The bigger the problem, the harder it will be to build a product. Many entrepreneurs focus on the big picture at the idea stage and try to find the best people to build the product. You need to be able to build the first version of your product by yourself or with minimal help so that you can push it out in the market asap. Luckily, the cost of testing business ideas is getting lower and lower.

Focus on tech and not on the problem

Often startups are run by founders highly specialized in tech solving interesting technical problems, instead of making users happy. In a startup, you’re not just trying to solve problems for the sake of it. You’re trying to solve problems that users actually care about. Otherwise, you will end up with a solution that is looking for a problem. An example of such a company was Segway.

Taking bad advice from the wrong people

The startup ecosystem has given leeway to a lot of people who are disguised in the form of angel investors, mentors, advisors, consultants, and gurus. That means a lot of founders are getting a lot of bad advice from unqualified people. Just because someone has a lot of experience does not mean they have the right advice for you.

A lot of entrepreneurs fall into the traps of such people and end up giving them a lot of equity and bringing them on as advisors. Before asking for advice, check the background and profile of your sources.

 

Business success emerges from the combination of a broad range of activities at the right time and place. Building a sustainable business takes time and you go through a number of different phases in which different opportunities and pitfalls appear.

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