What startups should do ?

Today, Entrepreneurship has captured the imagination of millions of young budding professionals.The idea of creating your own organization, being the master of your own universe and breaking the shackles of your monotonous working life enthralls the mind. They embark on the journey of exploring novice and powerful ideas which holds the potential of creating a business out of it. However, the type of people who choose the path of entrepreneurship can be classified into three broad categories. There is a bunch of individuals who look for a way out of their professional monotony and go for startups. Another bunch of individuals who look at others and get lured by the promise of immense wealth in a short period and give in to the desire. And the last bunch who think they have an idea which can change the life of others and is worth giving it a try.

Out of these three groups, many of them have failed miserably in the past while some have attained skyrocketed success becoming a source of inspiration for others.According to a survey by McKinsey, around 50% of the startups shut down within the first year of its operations. Anyways, the question that arises in many of our minds is what really goes into making a successful venture.What is the best-fit formula for success? Is it the founders? Is it the angel investors? Is it the business strategy? Is it the market that you are focusing on? Or is it just the big idea which makes the trick.In reality there is no hard and fast formula for success in a venture which is applicable in all cases. It is a highly subjective concept which is impacted by many internal and external factors and in most of the cases a combination of all of the above. First of all it’s very important to define success. The objectives of the business needs to be crystal clear.Whether it is earning huge revenue or capturing market share or building brand equity that should be decided first. Now, let us analyze some of the aspects to understand the reasons for failure of various startups.

The Big Idea

The most important factor while going for a startup is the big idea that the startup is based on. First of all, the founders should have full confidence on the idea and should have the potential to convince others to believe them. Another consideration is whether the idea can be materialized into the product or not. Many a times a product fails to reflect the true essence of the idea.Now, another most important consideration is, whether the idea actually solves anexisting problem. If the problem is creating enough trouble for target customers to go for spending their money on the solution. The customer’s need that is being addressed by the product should be understood clearly and the target customer should be large enough to generate a substantial revenue to at least support the business operations. The market niche it is targeting at should be accessible. Many a times a great idea cannot be converted into a marketable product because it did not provide a solution. According to a survey, around 42% of the startups faced failure because the founders loved the idea but didn’t know which problem of the customers can be solved by it.Another important factor is if the product is suitable from a customer’s point of view. Ease of use is a necessary factor in every product. Analyze the expertise, the skill level of the target customer. Sometimes a brilliant product might be so complex to be used by the target customer.


It should also be clearly analyzed if the product comes in the new product category or in the existing product category. If it’s in the existing category, what is the unique value proposition of the product and how substantially different it is from the competitors providing the same product.The differentiation can be achieved through product, price, promotion or place. And the market conditions should be conducive for the launch of the product. A complete PESTEL analysis should be conducted to understand the external factors which can influence the business. Also, in case of digital and technology based products the product lifecycle is too short and the product gets outdated too easily. Hence, the idea should be substantial enough to create a sustainable business model. In some cases wrong pricing strategy becomes an issue and the company fails to attract the customers. Think from the perspective of the user, try to understand the perceived value and determine how much you will be willing to pay for the product. The price set should not be so less either, that it fails to generate the required revenue.

The sources of funding

One of the pre-requisites to starting a business venture is that, the company should have enough cash to run the business. In 95% of the cases, founders look for external sources to provide funding to their project. Today, there are numerous opportunities for generating funds for a business. There are several business plan competitions organized by several institutions which provides a platform to the budding entrepreneurs to present their idea and capture the attention of the investors.There are angel investors and venture capitalists in the industry who look for innovative ideas and are willing to invest in new ventures. In many a cases founders have a strong network of contacts/advisors who support them financially.

However, in many cases it is observed that the startups have to shut down their business due to running out of cash. They fail to create the necessary impact or generate the expected revenue in the market and as a result of which they have to close down the business. One of the important points here is the financial plan made at the beginning of the project. A conservative approach should be taken while estimating the returns. Many a cases it takes time for the business to come into notice of the customers. Founders take the best case scenario and make the financial plan accordingly. A worst case analysis should be done and sufficient cushion should be managed while generating cash for the business. It should be kept in mind that overestimating the revenue might severely impact the business as shortage of cash might shut down the operations. The aspects like assets, liabilities, return on investment should be kept in mind and the break-even period should be determined accordingly.

The Right Team

A correct team mix builds a robust foundation for any project. The team should have all the critical skills required to start a business.Also, it is advisable to have a team small enough to be managed smoothly and large enough to fulfil all the needs. The decision-makers of the company should have an advisory network to provide necessary guidance and support. The team should be driven by a passionate and dynamic leadership with which can take the team in the right direction.

The Business Strategy

A brilliant idea, sufficient cash reserves and a right team together cannot make a successful business venture unless and until the team has the business acumen. The skill of running a business requires much more than idea generation. A full proof business strategy is the last but most crucial component in creating a business. The business itself can be essentially captured by the vision, the mission and the goals of the company. The long term and short term plan should be clearly understood. The business strategy consists of all the dimensions of business like finance, marketing, operations, systems, HR and develops a plan to manage all of it. The organizational goals should be outlines clearly and every functional strategy should be aligned with the organizational goals.The strategy includes the geographies where the product is being launched, the go-to-market strategy, the distribution channels, the promotion strategy, the competitive strategy, the supply chain network, the role of technology in the organization, the HR policies, the organization structure, the infrastructure etc. Each of these components do have the potential to severely impact the success of the company. There should be a proper framework of implementation which should reflect the vision, mission and goals of the company.And also the strategy should be flexible enough to follow the market trends. The business plan should address all the stakeholders of the company and the plan should be aimed at the overall growth of all its stakeholders.


The startup era has given wings to the ideas of thousands of innovators. The enormous success achieved by the new ventures has truly amazed one and all. However, the success strategy cannot be captured with any formula as it is aninterplay of millions of factors and the right decision depends upon the situation. However, it may be broadly summed up by the following statement; the right product, the right plan with the right people at the right time.

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