As an entrepreneur, you’ve probably heard or read “Maxim” that only 10% of startups succeed, but is it true? And if so, what strategies can you implement with your company so that it doesn’t share its share of statistics failures? How can you avoid being a part of 90% of the failing companies?
Failure statistics – avoiding being part of the 90 percent.
There has been a general idea that almost all enterprising companies fail to succeed. However, to show you how true this statement is, to do some thorough research and we must conclude that, although there is no consensus on this figure, it is at least 60% of all cases.
According to a study by CB Insights (2017), a software that collects essential data from investors, companies and industries, more than 70% of startups do not exceed the first stage of venture capital investment. These results were achieved after the following round of funding of over 1000 technology companies in the United States. Rounds were held from 2008 to 2010, starting with seed capital. Of these, only 46% were able to raise enough funds for the second round of financing.
It should be noted that as the round progressed, this percentage decreased, achieving a final figure of 1% success, with companies currently recognized as Uber or Airbnb and valued in the study at a billion dollars. (unicorn companies).
These findings coincide with a 2012 investigation by Harvard Business School professor Shikhar Ghosh, who studied more than 2000 companies that received venture capital investments of at least one million dollars from 2004 to 2010, in addition to Entrepreneurs interviewed and registered carefully. portfolio of investment firms, to conclude that about 3 out of 4 startups fail.
Despite the results of both investigations, not everyone agrees with such high figures. Fortune published an article titled, Conventional Wisdom Says, 90% of Startups Fail. The data says otherwise.
The data says otherwise) It was indicated that, according to global investment firm Cambridge Associates, based on monitoring venture capital investments of 27,259 startups between 1990 and 2010, the failure rate for startups since 2001 exceeded 60%. Not there.
Why do so many companies fail?
After CB Insights’ investigation revealed such alarming numbers of failures, the company decided to compile over 100 post-mortem papers from various startup founders to find out the reason for the failures. In the end, he found a pattern in all tests and summarized the reasons for the failures, some of which I have highlighted below:
1. The product/service did not meet any requirement in the market.
It is fundamental that during the market research process, you observe whether you can solve some important problem in mind. Many entrepreneurs underestimate this aspect, with the zeal to test their idea, with the belief that they can persuade their target audience to buy your product or use your services, as we see , it doesn’t happen.
2. No money to continue investing.
Being cautious and disciplined with your finances can be the difference between maintaining your project so that you eventually succeed and go completely bankrupt. It is therefore important that you devise a plan where you specify very well where your resources will be allocated.
3. Choosing the wrong team or not including potential partners.
A lot of what makes a company embodied has to do with the people you’re working with. It is paramount that you limit the responsibilities of each member of your team within the company from the very beginning. Make sure everyone can perform their tasks perfectly.
Furthermore, CB Insights points out that, in some cases, the company’s founder indicated that it was a mistake not to select a better partner to balance a team. The company felt that someone else could help them think better when faced with making important decisions. Therefore, having someone who can help and advise you on complex processes will be a positive for your company.
4. Ignore the competition.
While it is not advisable to focus on companies competing in your area, it is always a good idea to be aware of their business model, the updates they make and how your product/service can benefit them. Good idea. Some founders reported that being different from what their adversaries were doing did not allow them to see that they had already managed to solve the market problem more efficiently.
5. Fixing substandard price with respect to its quality and cost.
Finding the right price for your product/service can be a real nightmare, as you must take into account its quality for customers and all the money used to produce it, so it’s important to find a way that will be accessible with respect to its quality and in return, allowing you to cover production costs and obtain profit margins.