Why do Many Start-Ups Shut Down?

Why do Many Start-Ups Shut Down?

Post covid, many firms, especially #techstartups, scaled their customers, users and employees, but many start-ups struggle to sustain themselves with the current inflationary environment. Although founders attribute it to a higher cost of capital, I believe the problem lies in the issues with their fundamentalย #businessmodels.

First, not all start-ups are struggling. ๐–๐ก๐ž๐ง ๐ข ๐š๐ง๐š๐ฅ๐ฒ๐ฌ๐ž๐ ๐Ÿ๐Ÿ•๐Ÿ“ ๐ฌ๐ญ๐š๐ซ๐ญ-๐ฎ๐ฉ๐ฌ ๐ข๐ง ๐ˆ๐ง๐๐ข๐š ๐›๐ฒ ๐ง๐จ ๐จ๐Ÿ ๐ฎ๐ฌ๐ž๐ซ๐ฌ, ๐ž๐ฆ๐ฉ๐ฅ๐จ๐ฒ๐ž๐ž๐ฌ, ๐œ๐ฎ๐ฌ๐ญ๐จ๐ฆ๐ž๐ซ๐ฌ ๐š๐ง๐ ๐ซ๐ž๐ฏ๐ž๐ง๐ฎ๐ž๐ฌ ๐ข๐ง ๐ญ๐ก๐ž ๐ฅ๐š๐ฌ๐ญ ๐ญ๐ก๐ซ๐ž๐ž ๐ฒ๐ž๐š๐ซ๐ฌ, i found:

1)Start-ups that ๐ ๐ซ๐จ๐ฐ ๐ฎ๐ฌ๐ž๐ซ๐ฌ, ๐œ๐ฎ๐ฌ๐ญ๐จ๐ฆ๐ž๐ซ๐ฌ ๐š๐ง๐ ๐ซ๐ž๐ฏ๐ž๐ง๐ฎ๐ž๐ฌ ๐Ÿ๐š๐ฌ๐ญ๐ž๐ซ ๐ญ๐ก๐š๐ง ๐ญ๐ก๐ž ๐ง๐ฎ๐ฆ๐›๐ž๐ซ ๐จ๐Ÿ ๐ž๐ฆ๐ฉ๐ฅ๐จ๐ฒ๐ž๐ž๐ฌ are profitable and do not rely on external funding.

2)Start-ups where ๐ž๐ฆ๐ฉ๐ฅ๐จ๐ฒ๐ž๐ž๐ฌ ๐ ๐ซ๐จ๐ฐ ๐Ÿ๐š๐ฌ๐ญ๐ž๐ซ ๐ญ๐ก๐š๐ง ๐ฎ๐ฌ๐ž๐ซ๐ฌ, ๐œ๐ฎ๐ฌ๐ญ๐จ๐ฆ๐ž๐ซ๐ฌ ๐š๐ง๐ ๐ซ๐ž๐ฏ๐ž๐ง๐ฎ๐ž๐ฌ ๐ก๐š๐ฏ๐ž ๐ซ๐ž๐ฌ๐จ๐ซ๐ญ๐ž๐ ๐ญ๐จ ๐ฅ๐š๐ฒ๐จ๐Ÿ๐Ÿ๐ฌย and cost-cutting. These start-ups have issues with their fundamental business model, making me question how they received funding in the first place.

3)Many start-ups that struggle focus on the technology, the product and design but miss ๐ก๐จ๐ฐ ๐ญ๐จ ๐ฆ๐š๐ค๐ž ๐ฆ๐จ๐ง๐ž๐ฒ ๐›๐ฒ ๐š๐œ๐ช๐ฎ๐ข๐ซ๐ข๐ง๐  ๐š๐ง๐ ๐ฌ๐ž๐ซ๐ฏ๐ข๐ง๐  ๐œ๐ฎ๐ฌ๐ญ๐จ๐ฆ๐ž๐ซ๐ฌ.

My insights after completing this study:

1)๐“๐ž๐œ๐ก๐ง๐จ๐ฅ๐จ๐ ๐ฒ ๐ข๐ฌ ๐ง๐จ๐ญ ๐š ๐๐ข๐Ÿ๐Ÿ๐ž๐ซ๐ž๐ง๐ญ๐ข๐š๐ญ๐จ๐ซย in this digital world. However, figuring out the right combination of services to package a breakthrough product is a differentiator.

2)๐๐ฎ๐ฌ๐ข๐ง๐ž๐ฌ๐ฌ ๐ฆ๐จ๐๐ž๐ฅ ๐ข๐ง๐ง๐จ๐ฏ๐š๐ญ๐ข๐จ๐ง ๐ข๐ฌ ๐œ๐ซ๐ข๐ญ๐ข๐œ๐š๐ฅย for any start-up to disrupt. Once the start-up becomes a profitable unicorn, technology innovation helps retain the gains allowing them to exit existing markets/enter new markets.

For instance,ย Uber‘s biggest rival is notย Olaย in India butย #autonomousvehicles, which can obsolete Uber’s network of drivers.



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