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90% startups fail and ways to be in the 10%

Despite the prevailing situation of covid 19, the number of small businesses and startups continue to rise even higher. Last year alone, the US saw a 10-year high in venture capital investment and fundraising activity. Specifically, business startups grew from 3.5 million in 2019 to 4.4 million in 2020, a 24 percent increase - according to the PIIE report. Not only the US, the European and Asian markets are also seeing healthy activity.

The start-up community is one of the most lively areas of the financial system, but it is not for the faint of heart. Entrepreneurs and investors must overcome a variety of challenges in order to build a successful business. Gaining a better knowledge of these startup challenges can support the discovery of new solutions to streamline the startup process. 

1. No market needs

According to 2021 statistic of embroker:

About 90% of startups fail.
• 10% of startups fail within the first year.

• Failure is most common for startups during years two through five, with 70% falling into this category.

There are many misalignments for startups that lead to an unsuccessful business. The number one reason is due to misreading market demand. This takes up to 42% cases according to CBInsights. 

Many business owners fail to plan for their company's marketing needs in terms of finance, prospect reach, and precise conversion-ratio estimates. It can be difficult to get funding or redirect cash from other corporate units to cover the difference when organizations misjudge the entire cost of early marketing initiatives.

A startup does not solve a market problem, it fails. No matter how fantastic technology, excellent data on shopping behavior, a fantastic reputation they have, but a lack of a scalable technology or business model to address the pain point would make it go nowhere. 

How to avoid: 

A successful firm maintains an eye on its present and future consumers' changing values and interests. Customer relationship management (CRM) systems can be used to survey customers, do market research, learn about their interests, and keep track of changes and trends. CRM can assist you avoid going out of business if you use it correctly. Just trying asking yourself some of these basic question before starting any business:

Whatever your business, you'll need to know:

Is there a demand for your product or service?
• What would people be willing to pay for it?

• Can you make it for them or provide it to them at that price?

• Is your price competitive?

When you conduct market research, you'll be able to:

Provide you with the information you require to plan.
• Reduce your chances of making poor judgment.

• Determine whether or whether there are any new openings.

• Assist you in improving your marketing and selling points, as well as creating successful advertising.

2. Run out of cash

For startups, cash is king. Without sufficient cash flow, even the most effective business concept will fail. Money and time are limited resources that must be used wisely. 

Running out of money was cited by 24% of firms as a main challenge for startups in their failure, while another 13% failed to secure funding.

Running out of funding was often linked to other reasons for startup failure, such as failure to discover product-market fit and failed pivots, as the Flud team demonstrated.

As a matter of fact, Flud's demise came as a result of the company's inability to raise this additional cash. Flud eventually ran out of money — and a runway — despite many methods and reincarnation in search of the ever elusive product market fit. Or just like Daqri, an augmented reality firm, shut down in September 2019 after burning through more than $250 million in capital and failing to attract a new round of funding.

How to avoid:

Monitor your cash flow: Cash is king, and it can run a successful business when money comes frequently. Financial continuity is critical because it ensures business stability and offers a stable basis for future growth. Keeping track of your funds is an important element of running a business.
• Controlling credit: While you don't want to be completely reliant on large invoices, you also don't want to allow smaller ones to pile up. While pursuing delinquent clients may appear to be extra labor, these tiny sums can mount up over time — and boost your operational expenditures.

• Extend your horizons in business: If, like many others, you are unable to operate your business as usual during the epidemic, or if the market has altered regardless of the pandemic, you must pivot your business to extend your sales market. This could be done by providing new products or services to existing clients, or by launching a referral program to expand your consumer base.

3. Not the right team

Beside cash and market needs, building a quality internal team also the challenges for startups during 2021. A diversified staff with a variety of skill sets was frequently recognized as crucial to a company's success. “I wish we had a CTO from the beginning,” or “a founder who liked the business aspect of things,” were common themes in failure post-mortems.

Weak teams create errors in a variety of areas: They are frequently lacking in strategy, resulting in a product that no one wants to buy due to a lack of effort done to validate concepts before and during production. Poorly thought-out go-to-market strategy can be a result of this. They're usually bad at execution, which leads to problems like the product not being built properly or on time.

How to avoid:

It's easy to look at candidates' capabilities on paper or how they fit into the role you're giving when you're hiring. However, you must go further.

Get to know them as individuals. Discover what they enjoy doing. Perhaps one of their hobbies will have a significant impact on your company. Building a positive business culture within working space is just as important as building the future of your firm.

For example, if your new recruit enjoys writing, they could be able to assist you with some marketing responsibilities. Employees are happier when they are regarded as actual people rather than cogs in a machine, even if they don't use the information they learn.

When speaking with or about your team, the goal is to forget about stereotypes. Concentrate on their personalities, abilities, and objectives. When you can align everyone's passions and capabilities to create a highly engaged team, your efforts will pay off.

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