Market Overview

10 Pitfalls All Startups Should Desperately Avoid

10 Pitfalls All Startups Should Desperately Avoid

One of the quickest ways to go from rags to riches in America is to launch the next billion dollar startup company. But creating a successful startup is much harder than it seems.

In fact, CB Insights recently found that 70 percent of tech startups fail all-together. Earlier this year, FastCompany found that number to be even higher, at around a 75 percent failure rate.

While understanding the risks doesn’t necessarily make a startup founder immune from them, it’s always good to be aware of potential stumbling blocks ahead of time. Here’s a rundown of CB Insight’s top 10 reasons technology startups fail.

10. Product Mis-Timed (13 percent)

Inventor Nikola Tesla experimented with wireless communication shortly after the turn of the 20th Century, but his ideas were decades ahead of their time. Sometimes, being too early to the party is as bad as being too late.

9. Ignored Customers (14 percent)

It doesn’t matter how clever a product or service is, if the customers don’t feel appreciated or if they feel their specific needs are not being met, they may not stick around. The customers should dictate the direction of a startup, especially in its early stages.

8. Poor Marketing (14 percent)

A startup could have the best product on the planet, but if potential buyers don’t know about it or don’t understand it, the company is destined for failure. Marketing campaigns can be very expensive, but a strong, clear marketing campaign can make the difference between a hit and a flop.

7. No/Bad Business Model (17 percent)

Tech visionaries often think of their hardware or software as a child, which is understandable given the time and energy they put into developing it. However, investors and customers don’t care about how impressive the product is-- they care about dollars and cents.

6. Poor Product (17 percent)

While product certainly isn’t everything, it's very important. Any successful company requires dozens of different moving parts, but they are all build on the foundation of a string product or idea.

5. Pricing/Cost Issues (18 percent)

Once again, investors and customers don’t care how great a product is if it costs too much to buy or produce. Customers may be wowed by the technology. But if the price isn’t right, a startup won’t make it much farther than a demo.

4. Competition (19 percent)

Startups are inherently at a disadvantage when they enter the market because they are starting from scratch while competitors have established relationships and pedigree. Startups must overcome those disadvantages and provide a better product and/or a lower price than established companies.

3. Not The Right Team (23 percent)

The old adage that a chain is only as strong as its weakest link is certainly true in Silicon Valley. The smaller the team, the more critical it is that every team member is pulling his or her own weight and it being utilized to maximize his or her strangths.

2. Ran Out Of Cash (29 percent)

It takes money to make money, and building a company from the ground up is expensive. If results aren’t delivered in a timely manner, cash balances can quickly evaporate and investors can move on to greener pastures.

1. No Market Need (42 percent)

Even if a startup does everything right in identifying a advantageous product, assembling a top-tier team, securing adequate funding and launching an impressive marketing campaign, a startup is dead in the water if its product or service doesn’t fill some sort of market need. Every successful product in history has filled some sort of hole that customers may or may not have been aware of at the time.

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Posted-In: CB Insights Nikola Tesla Silicon ValleyEntrepreneurship Startups General Best of Benzinga