Why do most startups fail?


As a contributing member of a group of investors, I know my way around the angel investing world and have worked with many startups through the years.

Therefore, I have decided to share my knowledge and experience in this field with the GVI global community to shed light on the most common mistakes startups make, which set them up for failure, and how to avoid them.

Here are 3 common things to avoid:

  • Supply but no demand

In my opinion, the first mistake they could make is to act exclusively out of emotion, they’re excited about the technology created or that their product works, and don’t think their actions through rationally or logically. From the get-go, they adopt a tech perspective that doesn’t align with real market needs: and without demand, there is no need for supply.

  • Lack of deep market research

Staying on topic, in many cases, the founders don’t actually pay enough attention to deep market research, competitor analysis, and entry barriers: all necessary topics to be looked at in depth by the startup.

If these steps aren’t checked off the to-do list, the natural consequence of this, unfortunately, falls on the user experience of the product, which is compromised, and usually lacking when faced with competitors.

Therefore, completing this research is key to the success of your startup.

You can begin this process by asking yourself and your company a series of questions:

  • Who is the target audience to your “solution”?

  • What are their weak points?

  • What to expect from the “solution” or product?

  • and What should be the business model that could fit their expectations?

Deep insights about user experience are needed and the GUI (graphical user interface) needs to be taken into account.

  • Undetermined rights & blurred lines

Another mistake to be made refers to the legal framework between startups and developers.

This miscommunication is the root of the failure of many startups: they wish to attract developers that will aid them in the creation of their product, which they’re unable to produce due to lack of skill or know-how, but don’t sign or write up a formal contract.

The developer can then sue the startup for which they worked for and obtain the IP and full rights on the product.

Who can help & how can we do it:

We at GVI aim to guide you through this perilous process by assisting startups in bridging the gap by doing the required market research and advising them on how to utilize it during product design and development.

As for the investors, GVI offers second opinions as part of the pre-evaluation process to minimize their risk if the founders are technology-oriented and a broader understanding of the market needs.

Finally…

I hope these examples of potential mistakes can help open your eyes, and push you to start knitting the safety nets necessary to prevent failures of any kind. You can always turn to GVI, whether startup or investor, to supply you with the essential yarn and toolsets to set you on the right scarf…or path!