Startup fails when it’s just about a dream

Common startup failure and mistake

Jack Ma, the founder of Alibaba said “If I can be successful, 80% of the young people in the world can be successful.” In recent years, there is an increasing trend among young adults to start their own business. Unfortunately, according to the report of Forbes, things always go wrong — over 80% of startups failed. Here, we have chosen 2 reasons of startup failure and discuss it further. We hope potential entrepreneurs can understand what is or what is not real about startups.


Marketing is more critical than you think 

You may think: My product is so great, it does not need marketing.

Or does it?

Some articles or new players claimed that “Sales is more important than marketing” or they do not do marketing. This is certainly misleading. Fortune has done a survey on why startups fail in 2015, asking their founders what are the reasons of failure. Among the top 10 reasons, 6 of them are related to failure in marketing. The top reason that they have chosen is “there is no market need for their products or services”.

This shows the importance of doing a marketing research before launching any products. Entrepreneurs need to understand the needs of the market. This is a simple principle of doing business but a lot of entrepreneurs have forgotten it when pursuing their dream. They provide what they want but overlook the actual need. They forgot about their customers.

Marketing is the foundation of a startup. Marketing research, marketing components and promotions help a startup to understand more about the needs of the market, its products and educate the consumers.

The failure in marketing can be interpreted in different ways: lack of need, lack of understanding, or the market does not know the product. The failure of Color, a video streaming app, is an example showing how failure in marketing kills a good idea. People in 2016 are crazy in sharing photos or live broadcasting. However, back in 2010, consumers were not that keen on it. An insufficient demand and user base destined the death of this social app. If this app was launched with more understanding about the market or at the right time, the result could be totally different.

Marketing makes a difference in the destiny of a startup.

A sustainable business model is more important than a great product

Developing a great product does help the growth of a startup to achieve success but cannot keep it long live.

A great product can help a startup to attract investors, yet entrepreneurs need to know how to generate sufficient revenue from it. DrawQuest was a successful mobile app. It had 1.4 millions of download times and 25,000 people were using it per day. It integrated the app and people’s social life successfully. It allowed users to draw pictures then shared it to their friends for making a guess. It was popular. However, it failed.

The reason was simple. DrawQuest could not develop a profitable business model. The app was free for download but it was the only product for the company to earn revenue. Its previous success heavily relied on VC and investments. After investors stopped their support, it was unable to self-sustain. Although the company tried to sell drawing pencil in the app to gain profit, it was not enough.

Startups should develop a profitable business model before they start doing business. They should understand capital from VC and investors only serve as a booster for a company. To survive, a startup needs to generate revenue from their consumers. Before everything starts, entrepreneurs should have a plan for predicting the period of generating profit. They need to form a clear formula between the cost of acquiring a customer and the customer life time value. The life time value must be larger than the acquiring cost. Otherwise, the business will fail.

Always remember a business is an organization for making money, not a R&D center. A sustainable profit plan is essential.

Your startup will fail when it’s just about you

Many people want to own a company because this is their dream. However, a startup has to survive in reality. Entrepreneurs must be awake to the challenges. A detailed marketing plan and a sustainable business model is the fundamental requirement for survival the cruel business world.


90% Of Startups Fail: Here’s What You Need To Know About The 10%, Forbes 955e1

Why startups fail, according to their founders

Today my startup failed, Chris Poole

Why Color will fail (and how your social startup can succeed)

Why startups fail, according to their founders, Fortune


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