A technology startup is defined as a company working with a purpose of bringing technology products or services to market to solve a problem where the solution is not obvious and success may not be guaranteed. Uber, Tesla and AirBnB are all eminent examples of successful tech startups while WeWork, a company which very recently had a IPO (Initial Public Offering on the stock market) is an eminent example of a not so successful startup. Companies spring up at an astounding pace, which begs the question: why do many technology startups fail? In this article we will be explaining a few reasons why so many of these tech startups fail, regardless whether they are from Silicon Valley, India or even Singapore.
1. Insufficient amount of money. It is abundantly clear that in the IT and technology industry an enterprise without cash is doomed. There are two main reasons as to why this may come to be. The first reason is flawed business and financial plans. An erroneous business plan may mean that too much money is allocated to testing or developing the product or service that when it comes to manufacturing the company crashes and burns as a result. The second reason is that companies are irresponsible with their day to day operations which can result in the company running out of money.
2. Slow growth trajectory. The dream of all tech startups is to become the next multi-billion dollar Fortune 500 A Lister. However, if a tech startup is growing too slowly or isn’t growing at all, it might simply be the case that it will never grow. There are many reasons that this could happen. One of which is ,again, a faulty business plan which can mean that the company might never have been destined to make any money at all! In these cases, most startups either quit or they start from scratch with a better business plan.
3. A growth trajectory too fast. On the contrary, if a tech startup is actually going to fast and putting full throttle on the accelerator, it will probably run into problems ahead. One of these issues is overlooking the boring parts of business sales, channel development, managing cash flow, and daily operations of the company.
4. No market for the product. Establishing an idea for a particular product or service without market research in this day and age would be unintelligent, because consumers will only buy products that they know will be useful and worth it for the price they are paying . "Not every start-up is going to ... launch a revolutionary idea that takes the world by storm. In fact, most won't. Most successful start-ups find a way to reinvent something that's already out there," said Inc. in a 2016 article. Companies like Google might have been able to get away with it and break ground because of the first mover advantage. However, in this day and age, technology is close to it’s peak point so establishing a market idea without proper research will probably result in a flop.
Therefore, it is clear that starting a technology startup is no easy feat. Aspiring entrepreneurs must keep these tips in mind to establish and prolong the lives of their companies, and perhaps make a mark on our ever-evolving world.