why startups fail

Statistics show that about 80% of startups end up failing in the first five years of existence. The big question is the reason why startups fail? With the growing rate of unemployment, people have been clamouring for the youths to stop seeking jobs and start creating them. This has brought about a surge in the number of startups in existence.

What is a startup

A startup is a company designed for rapid growth. According to Wikipedia, “a startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model .”

A startup and a business have some major similarities such as they both make income. However, they are not the same thing.

3 Core Differences between a startup and a business

There is diverse difference between a startup and a business. They include:

  1. Longevity plan:

This is a core difference between a startup and a business. At inception, a startup is planned to outlive its founders. In comparison with a business, a startup at inception is structured to be here for a long while. I am not saying businesses do not thrive beyond their founders however 20% of startups go on to become large corporations.

2. Funding:

Startups are frequently in the eyes of investors. Probably because these investors can see that there is a long term plan involved. However, businesses don’t get as much opportunity for funding as startups do.

3. Business Model:

A startup at inception already has a business model in the works. The mode of implementing the business model is what changes from time to time. A business, on the other hand, does not require starting with a business model. A business can generate its business model along the way.

You hear every day that startups get all manner of funding and then you begin to ask yourself why do only 20% of startups survive the first five years?

13 Reasons why startups fail

Are you fretting about your own startup? Don’t worry amazons clique has got you covered. We have compiled 13 reasons why 80% of companies designed for rapid growth end up failing in their first five years of existence. These reasons include:

1. Lack of market:

The excitement of creating a startup makes a lot of startup owners dismiss the need to identify the market for the goods and services their startup will be providing. Irrespective of our amazing an idea may seem, if you there is no market such startup is on the route of failure.  A startup without a targeted market eventually fails because there will be no cash flow to keep the startup running.

Is there really need for what your startup is offering???

2. Inappropriate marketing strategy:

Marketing helps the startup to sell itself to its target audience. The power of marketing in the growth of a startup can not be underestimated. If a startups spend a lot on marketing strategies without thinking about the efficacy of the strategy they are investing fail is about to happen. This is another major reason what startups fail.

“Marketing without data is like driving with your eyes closed.” – Dan Zarrella

3. Disregarding consumer’s opinions:

A startup that wants to be successful is tailored towards providing value to a particular set of people. Those set of people that the startup solve their problem are referred to as the consumer. A lot of startups that have failed has done so because they disregarded what the consumer of their good and service have to say and offer. One of the reasons why startups fail is because they have not understood that at the end of the day, the consumer is king.

“Whoever understands the customer best, wins.”- Mike Gospe

4. Location:

A lot of startups have failed because they disregarded the power of their location in their growth. Siting a startup in an environment that is not accessible, marketable and does not offer any value to the surrounding people is a recipe for a major failure. The location of a startup contributes to why startups fail.

As a startup owner you need to consider proximity to investors, team members, consumers and other resources when siting your startup.

5. The wrong team members:

Startups that are sailing with the wrong team is heading for disaster. Every startup heading for success should be founded with the right team to have all the skills needed to move the company forward. When a startup is saddled with wrong team members, the startup required to drag the additional weight of the inefficient team member.  The lack of addition of team members with the right skill set to grow the startups contributes to a greater extent why startups fail.

Are you sure your startup has everything you need? You have to have all the right skills in the right proportion.

6. Funding:

Startups fold up as a result of lack of funding. Every startup incurs overhead running cost that the new startup can not afford in the beginning. At this junction, if the startup team cannot source additional funding that startup would crash in no time. 95% of the time, lack of funding is the major reason why startups fail.

why startups fail

7. Underestimating competition:

Although your startup needs to do things in a very unique manner, however, turning a blind eye to how your competitors seem to be doing better than you are, leaves you behind in your world of ideas. The competition shows you what is working in your field. Nobody is saying you should outrightly copy your competitors, however you want to avoid this reason why startups fail

“Competition is always a good thing. It forces us to do our best. A monopoly renders people complacent and satisfied with mediocrity.”-Nancy Pearcey

8. Fixing prices:

Startups fail when there is no balance between the price of goods and services and the quality of goods and services offered. Some startups are focused on the money they would receive and they forget that quality should precede the want for money. Asking for too much money for substandard service is fraud and asking for too little money may indicate that you are not sure of what you are offering.

One of the major ways a startups grows is by making sure your startup is generating revenue. Before asking why startups fail, you need evaluate if the price set for goods and services would encourage growth in the first place.

9. Losing sight of purpose:

Why startups fail is because they are not true or consistent with their statement of purpose. When a startup is in its growing stage a decline in what the startup has to offer could lead to a downturn in growth. This is understandable as most startups take a while before they can run themselves without external funds.

10. Lack of passion:

Starting a startup you are not passionate about is doomed to fail. The success of a startup dies not to happen overnight, it takes hard work and persistence. The only thing that can keep you moving till your startup becomes a success is your passion for it. Remember, it takes a while for your startup to start giving you the result you want.

why startups fail

“if you’re passionate about something and you work hard, then I think you will be successful.” —Pierre Omidyar

11. Legalities:

Anothe culprit for why startups fail is as a result of the legalities associated with a startup. These could become a cause for failure when the startup begins to spend money and time that could be better spent on the startup running cost on sorting the legalities surrounding the legalities on the startup development. You can begin to see why startups fail.

12. Forgetting your network:

As a startup owner, your network is your networth you know. How do you want your startup to succeed if you are unwilling to ask and accept help from your network? There is a lot to be learnt from those that have been in the game long before you came. Every successful startup owner has in-depth understanding of why startups fail.

You have to understand why startups fail to avoid it right?

13. Burn out:

Startup owners in the quest to grow their startup put in their all and forget their selves in the process. Startup owners tend to relax at a point which causes a decline in growth and ultimately leads to failure. Alot of startup owners have reported burn out as one of the major reasons why startups fail.

If you don’t avoid buRN out, your body would burn you out


All these are a number of reason why startups fail, however, this is not an excuse for you not to start a startup you already have in mind. You never know yours might be party of the 20% that survives the harsh statistics. It becomes easy to overcome the odds of why startups fail when you have mastered the journey of entrepreneurship, start here.


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