Why Startups Fail: Top 5 Reasons 2022


May 2022

In a year,  people with passion and ideas to make something of their own form startups, while some of them survive the market crunch, most of them fail. There are some obvious and some not so obvious reasons to the very question.

From the data gathered above, multiple reasons can be identified for a startup’s failure. Planning for a startup just doesn’t need an original idea to create something uniquely different though often time it gets the most hype. Not to say that the originality of the idea doesn’t matter but this is only the first step that has to be followed by countless other steps to make a startup successful. 

People often start half-cooked ideas, what does this entail? People often start things abruptly that leaves room for flaws. Insufficient planning, market research, lack of resources are some of the common reasons that startups come across when they start in a rush. 

Few Major Reasons for Startup Failure

Insufficient Market Research

Market research to assess if the market has the gap for your product is pertinent to your startup’s success. If your startup plan is to simply roll out a solution that not many people in the market demand then it won’t really sell. Before starting working you should conduct proper market research focusing on your target audience. 

Lack of Prior Planning

Having an idea is great but if you don’t plan accordingly, it won’t lead to success. This is where most startups fail, they don’t plan prior to execution of the idea. You should take in all the necessary steps before jumping on to the launch. This will give you an idea as to how things function in the market and what you need to have in place to make it successful.

Running Out of Cash

Another reason why startups fail is that they run out of cash. It is the responsibility of the CEO and the core team to manage the cash flow to keep the company running smoothly. Most of the time, people don’t plan through this step and they struggle to think through it when met with a cash deficit. 

It usually happens when management fails to achieve the next milestone before cash runs out. At times, it is possible to raise cash but unfortunately, the valuation at that point will be significantly lower. It is pertinent to plan cash management beforehand to avoid this situation. 

Read More: A Guide to Software Product Development

Poor Management Team

One of the major reasons why a startup fails is “Poor management team”. A smart management team has a plan in place to avoid the above-mentioned reasons but an average management team struggles with these problems and surely causes the newly formed company great loss. 

They are often weak in the strategy department, laid back on product research, don’t research enough to identify a target audience, and don’t have a backup plan in case anything goes wrong. For these and many other reasons, you need a smart management team before anything. 

If you can make sure to avoid these mistakes, your startup will sure not fall in the failed startup category. 


Fahad Ali, Author

Fahad is PM at ARFASOFTECH but has a knack for writing. He enjoys writing about the latest technologies and evolving trends. Most of his writings revolve around trending technologies and their integration into operations.

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