5 Risk Factors that Cause Startups to Fail

5 Risk Factors that Cause Startups to Fail

Are you a startup owner? Did you consider these factors before launching your startup? Do all startups succeed? No, but there are some characteristics that are common to all successful startups. Here are reasons why startups fail and how yours can succeed.

With so many risks associated with startups, you can know about the causes of risks in a startup business. To avoid failure, startups invest their time in risk management. Appointing a risk manager that takes stock of various risks associated with your startup helps in making your business much more successful.

Here are a few risks associated with startups:


Product Risk

Do you think it's easy to decide which product to offer? Ask a team of startup business, who analyze the market closely to understand the needs and demands of your customers. 

Creating a great product merely will not ensure the success of your startup. Unless there is a need of the product amongst the customers, the product will fade away in no time. This is why businesses undertake surveys and polls to know the needs and requirements of their targeted customers.

This risk can be controlled if you are able to understand the needs and requirements of the customers.

Risks from the Competitors

Is your startup offering something unique? Quite often, you'll find many startups that offer services/products similar to what your business offers. There will be many businesses that target the same customers as you.

To avoid this risk, you should be prepared to receive tough competition from your peers. The success of your startup depends on how your startup stays ahead of the competition.

Offer valuable services/products that are inclined with the needs of your customer and your startup will surely succeed.

Market Risk

Launching a new product in the market can be a challenging task where the success of your product is uncertain. The success of your startup depends on how well you are able to market your services/products.

This requires understanding where, why and how the customers buy products similar to what you are offering. You may conduct an in-depth market research to know what your targeted customers are inclined towards and your startup will not fail.

Financial Risk

There are many risks associated with starting a startup, one of them being a financial risk. With the uncertainty prevailing for your startup, the biggest loss can be of the investment in your startup.

The biggest nightmare for a startup can be running out of cash and not having a backup plan. With investors shying away from investing in startups, it is better if you start saving or investing in something to avoid running out of funds.

Team Risk   

A team that has members who are experts in their respective domains often succeeds in making your startup succeed. It is the duty of the founders to make a team that has an expert belonging to every single domain. Because managing a risk is never a single person’s task.

Therefore, invest in people who understand the vision of your startup and have the will to work for it. Because of the lack of funds, startups often end up hiring amateurs who don’t have an experience in getting your startup to a certain level. However, you should avoid doing this for your startup and focus on recruiting resources that are skilled at what they do.

We hope you’re now aware of the risks associated with startups. You might consider these risk before investing in a startup.

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  • Heather Michelle

    Another reason why startups fail is expansion. It needs to be fully costed and properly funded.

  • Liam Stubbs

    I agree with you that lack of capital is too simplistic. There are several factors which can halt the growth of your business.

  • Andrew Hartman

    Start-ups often fail because founders and investors neglect to look before they leap, surging forward with plans without taking the time to realize that the base assumption of the business plan is wrong.

  • Stephen Thomas

    If a business does successfully get off the ground, the likelihood of ever reaching meaningful size and revenue are slim.

  • Ryan Donnelly

    It’s safe to say that most startup of any nature fail or succeed.

  • Margaret Fawcett

    Our emotional attachment to our opportunities means we tend to turn a blind eye to the potential issues and not fully explore the downsides.

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Anuja Lath

Digital Marketing Expert

Anuja is the Co-founder and CEO of RedAlkemi Online Pvt. Ltd., a digital marketing agency helping clients with their end to end online presence. Anuja has 30 years of work experience as a successful entrepreneur and has co-founded several ventures since 1986. She and her team are passionate about helping SMEs achieve measurable online success for their business. Anuja holds a Bachelors degree in Advertising from the Government College of Fine Arts, Chandigarh, India.


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