Startup Guides

The Main Reasons Why Startups Fail – What They Are and How to Prevent Them

Why startups fail

Why Startups Fail? It’s a well-known fact that startups are a fickle enterprise. From start to finish, every entrepreneurial endeavor entails enduring a challenge of its own, from marketing and networking to a whole host of other obstacles. Bringing an idea to life is no small task.

It’s no wonder, then, that even innovative business ideas fail so often. In fact, a fifth of all startups crashes and burns in their first year. Even when you do everything right, startups can still be a bit of a gamble.

Related: 7 Things you need to consider before launching your startups

Still, every unsuccessful startup story can serve as a valuable lesson for aspiring entrepreneurs. With the power of hindsight, we can see why these businesses went under and how ours can avoid that fate.

We’ll explore some of the most frequent mistakes which leads to startups fail. These are mostly issues related to conceptualization, which means any most any business venture is vulnerable.

Spending Funds Too Quickly

One of the biggest culprits of startup failure is poor financial planning. As mentioned before, startups are a rocky affair, and expenses can vary over time. You have to anticipate in advance which phases will require the most money.

A useful tip is to divide your strategy using clearly defined milestones to make it easier to predict how much funds you should allocate, gaining far more control over your spending.

As a rule of thumb, keep spending low during development stages. Once your business model has been proven to work, it’s a lot less risky to increase spending.

Using a Faulty Business Model

Sometimes, no matter how much funding you pour into it, a flawed business model simply won’t take flight. More often than not, bad startup planning comes from skewed expectations. Inexperienced entrepreneurs often plan with excessively optimistic expectations.

The truth is that, even if it’s amazing, your product won’t sell itself.

When you see yourself getting bogged down in the details, it helps to take a step back and gain a fresh perspective. Essentially, your plan should boil down to two crucial factors: how to efficiently attract buyers and how to make them bring enough value to you to justify the resources you spent attracting them.

Related: How to start a business- A step by step guide…

Issues with Product/Service

If you step back from your failed startup strategy far enough, you might see the bigger picture. Sometimes no matter how you slice it, your product or service simply doesn’t fit with current market needs. If you’ve gone too far into the development stage, this is a serious problem that needs fixing.

To be clear, few products and services are perfect the first time around. An underwhelming product is a significant setback, but it’s still fixable, depending on the degree of error.

If market results are somewhat unsatisfying, reevaluate which particular aspects of your product don’t mesh well with market needs.

If the problem is more severe, you might need to go back to the drawing board. This kind of situation is easier to prevent than remedy. Extensive market research and remaining open to customer feedback can go a long way toward steering you away from this kind of disaster.

Limited Market Potential

Sometimes, a startup idea can be genuinely well thought through and still hit a wall because it doesn’t work for a particular market.

This is a symptom of many issues and most of the startups fail due to limited market potential. The root cause could be market saturation leading your brand to get lost in a vast sea of competition.

You could be too far ahead of the times, providing a solution that has yet to prove effective. It’s also important to be fully aware of the intention behind your product accordingly.

Ask yourself: Are you selling Vitamins or Aspirin? In other words, is this something people will buy because they like it or because they need it.

Related: 5 Ways to Improve Productivity for your Startups


Out of all ruined startups, these four fatal mistakes recur most often. They act like broken ladder rungs that keep many good business ideas from soaring. Now that you know about them, you can avoid these pitfalls which leads to startups fail on your way toward success.

CEO & Editor
I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as,, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

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