To run a successful and long-lasting startup/business, every entrepreneur needs to stand before risks he/she has never faced. To understand what makes a startup run properly, and what makes it last, one has to go back to the beginnings and learn from others’ failures and understand why startups and their founders face a meltdown taking their dream along with them. Where we have over a million startups in the world, and new ones being born every other day, it is very likely that numerous startups will  turn into failures for a variety of previously known as well as brand new reasons.  Unfortunately, the brand new reasons are a fraction of the known reasons of failure.

 

According to studies, around 20% of early-stage startups fail in their initial years. There has been a trend in these statistics for a few years. The rate of failure also varies among different industries, e.g., 15% of social assistance and health-related businesses fail in the beginning years, and 60% of startups in the transportation/construction industry fail in the later years

 

Since the failure rate in the social assistance and health-related industry is supposedly the lowest, these businesses see a longer life than any other. This could also be because there is a significant projection of 21% future growth in this industry. In their following years, the businesses also see a 25% failure rate, and 40% in the later years. On the other hand, there is the transportation/construction industry. Although it is expected to show a 13% growth, the businesses in this area show the highest failure rate of around 25% in the initial years, 35% in the following years, and lastly 60% in their later years.

 

Let’s briefly go over some top causes as to why these startups face their demise or a full-on meltdown.

Demand Problems

When a business runs out of demand, it becomes one of the most common reasons why that business fails. Over 40% of founders out there are subjected to a lack of demand as they approach the end of their first few years. When the market loses or doesn’t find any interest in a product, there is simply no business to run.

 

It is always helpful to keep the product/service that goes to the consumers in mind and keep upgrading and innovating on the last versions with the changing trends in the market.

2.   Money Problems

Every commercial workplace runs with the power of money. Money is the unsung necessity, without which, there are no business operations, no product to manufacture, no employees to hire, and no customers to serve. When a business runs out of money and is short on funding, it tends to lose that power and goes bankrupt leading to an inevitable meltdown of the whole firm.

This problem comes out as the one that every founder has to overcome at a certain point in time. So it is crucial to have a wise money management system and a selling point that represents the business so well it compels people to invest in it.

3.   Team Problems

A family is where its members stand, and a business is where its team stands. These words go true hand in hand as a business doesn’t run in the race solely on one person’s shoulders, rather it is more of a team effort. When the team itself, is not something to go with, it makes the entirety of the business distasteful leading to disputes, a dysfunctional environment, incompatible individuals, and a shattered vision.

 

Even in cases of family businesses, a collection of minds that are on the same page is really the key to having a good team to work with before all goes into shambles.

 

4.   Competition Problems

For every type of business founder, there is a mind that is thinking of a similar or better idea than the current. Businesses competing against each other is a day-to-day case when it especially comes to declining markets like bookshops. It all comes down to what a company has unique to offer. When a company fails to evolve with the market and competition, sooner to later it turns fatal for the business. Customers must be presented with better options than the competition as they see value in products that has the right utility.

 

There are many more reasons now why a startup meltdown may happen. We’ve also discussed this in detail here: Startups need not die!

 

We’ve seen how any what could lead to a business failure, let us now look at some popular meltdown cases across the globe to grasp a better understanding of the matter.

Juicero

Juicero Inc. used to be a well-funded U.S. business founded by Doug Evans. Its product was essentially a Wi-Fi-enabled juice press machine. The business’s demise was seen a long time coming by numerous investors and analysers. The concept didn’t appeal to the masses since the process was to press a company-sanctioned pre-packaged juice into a glass. The machine had to scan a juice packet in order to yield a glass of juice.

 

Along with an ill-minded product, the meltdown was the result of high prices and bad marketing as well. Juicero started losing around $4m of total funding regularly. After 4 years, the startup finally couldn’t find any new sources for funds and inevitably shut down forever.

ScaleFactor

ScaleFactor was founded by Kurt Rathmann to be an accounting software platform with a funding of over $100m from their investors. Its vision was to automate day-to-day accounting operations for different companies and their customers. Although it was a good promise, the problem with the business was that its approach and strategies were costlier than necessary, and customer needs were not the main concern as claimed by former employees. Aggressive tactics were used and the software itself was not up to its promise.

 

Soon, the number of customers started to dwindle, and the company officials attempted to cover the problem. When it all came to light, the company inevitably melted into a shutdown.

Call9

Call9 was a healthcare-centric company founded by Timothy Peck. Call9 used to provide professional medical assistance from nurses and doctors through video chatting on their app. Although they had a funding of $34m, it wasn’t enough to keep the operations running for a long time. The concept was a prominent one as it would have saved unnecessary costs of visiting and booking expensive services and rooms at local hospitals, and the reach had really widened from just the local doctors.

 

Along with being short on funds, it is said that the company and its investors weren’t on the same page. The company faced a long-time-coming meltdown in the end.

 

We see in different cases and many more cases out there that the success of a business does not depend only on a single factor like the cash in hand, or just a good product. The world is shifting its interests and the trends keep on changing all the time. Needs change and the actions have to change with them. Many good businesses come to a halt or a meltdown because they are simply cornered and unable to find their way out of the problem they get stuck in. Years have been difficult for both new and existing businesses, but there are always many ways a founder can stay in the race, everyone needs backup support, some insights, and inspiration on their hands. Most importantly, every business needs to learn from what came before them and what is there now.