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Why do so many start-ups fail?

A good majority of startup internet businesses fail, why is it so?

A good majority of startup internet businesses fail, why is it so?

Starting an internet business or a mobile business is one of the most exciting things people could ever do in their lives. I recommend people to try it at least once in their life. It doesn’t have to be grandiose; it doesn’t have to be a very big or overly ambitious project. You can start with a simple blog or website then scale it up. There’s just something to the mystique of starting small and going for your dreams then putting everything you have into your dream and seeing that dream materialize that speaks to the infinite human capacity to make things possible. It would be quite sad to cheat yourself of that feeling and experience. Of course, most of start-ups fail. That’s the reality. For every Google, there are thousands of companies that got funded millions of dollars that didn’t go anywhere. So why do start-up succeed and others fail? Here are just three common reasons, the list is endless but almost all start-up failures have these three in common.

Failure to scale-up ideas

Most start-ups are built around one particular problem set. In other words, they are built on one particular idea, this is fine if you’re just starting out. But once you get out of the gate and get some sort of funding, you need to scale up immediately. The problem is the world and your customers don’t just revolve around one very small and minute problem. In fact, what would seem like a singular problem to you, the start-up founder, might actually be a collection of similar problems. Companies that scale up from their initial idea look at their initial focus as their building block to approach larger and larger problems. Let’s take the case of Google. Google’s initial idea was to search for information, effectively. You have to remember that during Google’s start-up days, most of the search engines in the market are horrible in finding stuff online. In fact, they’re so easy to spam that at one point, in the evolution of the internet, most search queries even for the most innocuous search query turn up pornography. That’s how bad things were. Google’s singular problem was how to produce clean searches. It was able to deliver on that but guess what, it scaled up from that. It scaled up from retrieving information found on websites to retrieving images, retrieving news and so on and so forth. Now it has mobile search technology and it just released Google Glass, that’s how amazing Google is. What made it different was able to scale up its ideas and scale them up quickly.

Failure to implement systems

Google is the master when it comes to systems building. You can’t just be a one-trick pony. If you have a start-up that focuses on one problem and one problem alone and you build your solution on that one problem, guess what, your chances of becoming a bigger company or being bought out or evolving are quite low. You have to build systems even though Google seemed to have tunnel vision when it comes to search effectiveness, it built an ad platform that help monetize its search results. In other words, it built a monetizing system based on a search system. Once you start thinking in terms of systems, your chances of succeeding dramatically increase. No one problem is an island, problems are often interrelated and they need systems to help solve them. The more systems you have in place, the more automatic that they are and seamless they are. The better the value your company proposition would be to investors and buyers.

Building a business on buzz instead of profit

You don’t need too many examples to support this proposition. In fact, almost all of the internet companies formed during Web 1.0 fall under this category. It seemed that everybody and his dog were putting up an internet company. Every small problem that people run into necessitated building an internet company and people were throwing money at this company and money was flowing in. Mind you, this was money not generated from profit or sales but investor money. The party ended in 2001 when the stock market crashed for .com stocks. The great takeaway for that sad and sorry experience was that you can only live on buzz for so long. Hype can only take you so far. If you want a solid business, you have to focus on profit. That’s why internet companies now are vastly different from the internet companies during the heyday of Web 1.0.