Home to 21 Unicorns, India is being the 3rd largest startup ecosystem. The Indian startup has received increased attention in recent years. This simply means that their numbers are on the rise and they are widely being accepted and recognized as an integral part of growth.
Though the immense growth and support for startups that are available in all dimensions is a pleasant change, the cold and hard fact is that most of the startups in India fail within 5 years of their launch, as per a report by IBM Institute for Business Value and Oxford Economics.
There are numerous reasons behind the failure of the startup. But one major reason is due to the lack of innovation. Also, startups that fail tend to repeat the same mistakes that prove costly shortly.
Here is a list of five common pitfalls that every entrepreneur makes at the early stages, but should steer clear of them at any cost:
1. They don`t have a Leadership Team that encourages diversity
Starting our list with the most common but costly mistake that founders usually make is when they begin hiring people for their team. Many entrepreneurs hire people just like themselves. On the surface, this appears to be a sound idea, but the danger lies underneath. Without people who challenge the stereotypes and the founder`s thinking, a startup fails to identify new opportunities or to spot risks until it`s too late.
Avoiding this trap is essential to make a startup business successful. Startups should hire people who think out-of-the-box and know no creative boundaries. The diversity of ideas, skill sets, and backgrounds are the key essentials of every successful startup.
2. They Don`t Invest Time To Find The Right Venture Capital
Capital is essential. But this does not mean that every startup should rush after it. Speed is important, yes, but without breaks, it will result only in a misadventure. Finding a balance speed to find the right fit is equally essential.
Finding perfect Venture Capital is just like finding the right partner for marriage. Take enough time to find the right match- and avoid jumping at the first or the biggest check.
VCs are always on the lookout for the next Uber, Razorpay, Nykaa, or Facebook. To increase their chances, they may invest in multiple companies and come with a growth-at-all-mindset.
To avoid a situation like that put in a considerable amount of time to find a VC partner that will provide thoughtful guidance, mentorship and will be there for you during the challenges.
3. They Create Products Without Considering Customer`s Pain Points
Too often founders get overly enthusiastic about their ideas related to their product or service. They often believe that once they build a product, customers will come. But building a product or a service without any customer validation or A/B testing can be dangerous for a business.
Instead, founders of startups should always find an alpha customer and then create a product to solve the customer`s biggest pain point. Creating a customer-centric product doesn`t happen by just sitting around a conference table brainstorming. The idea to build an amazing product comes from seeking out and tackling the real problems in the world that already exist.
4. They Lack a Clear, Concise & Focused Go-to-Market Plan
More often than not, startups are known to overestimate the demand for their products. Generally, they also lack a clear understanding of how to bring their big ideas to the market. Entrepreneurs should document a clear and concise path to their profitability. To chart this document they should conduct rigorous research and analysis that challenge their market estimates.
This requires an in-depth knowledge of the strengths and weaknesses of their market competitors. Along with that, they should also determine the company`s proprietary advantage in each market segment it is looking to penetrate.
It is also important to be prepared in advance to be able to shift the business with the technological advancement or according to customer needs. And while adaptability is crucial, having a focused plan is also essential. As a startup the resources are generally limited, thus, it is important to be laser-focused for maximum impact.
5. They don`t build Strategic Partnerships
Many startups think about partnerships just in terms of capital and checks. But startups also require strategic alliances that will help them refine their business models, new customers, scale revenues, and generate market awareness.
By making partnerships with large and established companies, startups can save costs on R&D resources as well as the expertise of their professional team.
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