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5 Reasons Why Internet Startups Fail

Why Startup Fails

The phenomenal success of internet businesses such as Google, Facebook, Amazon, Tencent and Alibaba continues to inspire thousands of budding entrepreneurs to launch their own online startups. Unfortunately, many such startups fail. One report suggested that as much as 9 in 10 do not survive.

The reasons for such failure are diverse. For founders, knowing these reasons and finding ways of avoiding these pitfalls can go a long way in ensuring that their startup is among the few that do make it. Here’s a look at these reasons.

1. Poor Market Research

Your business needs customers; people who are ready to pay for your product. If you do not analyze the demands and needs of your target market beforehand, you may end up with a product that no one is interested in.

Remember that your online startup does not exist in a vacuum. Your customers have options and are under no obligation to buy from you. If your competitors provide a more compelling value proposition, your startup is doomed to failure from the get go.

2. Excessive Downtime

A high quality website that ticks all the right boxes is great. However, of what value would such a website be if it’s regularly inaccessible? Your website will be hosted on a third party’s server so downtime may not always be within your control. However, there are times when it is. For instance, if your agreement with the hosting provider includes a bandwidth ceiling, you could be sabotaging your website simply because you underestimated the bandwidth you needed.

Overall, before choosing a website host, take a look at the service level agreement and ensure it guarantees very high uptime. Second, find out what measures the host has put in place to minimize downtime. For example, do they have a mechanism for managing syslogs in the cloud so they can pick up unusual activity before it leads to actual downtime?

3. A Bad Website

As an online startup, the Internet is your place of business. Unlike a brick-and-mortar store, your website is where customers will engage with you and buy into your product. The quality of your website can therefore determine whether your product succeeds or fails.

The website should be fast, well organized, visually appealing and easy to navigate. It should provide all the information the customer needs to make their decision. A good website will also have a way of obtaining visitor feedback such as a contact form or email address.

4. Poor Internet Marketing

The day your startup website goes live, it joins the billions of web pages already on the Internet. From the start, you are in a relentless battle for eyeballs. There are no shortcuts; You are going to start with almost zero traffic at the beginning. But you have to raise visitor numbers quickly if you want to start generating revenue.

A surprising number of startups do not have a well-planned internet marketing strategy that can do that. They therefore quickly burn through the little cash they had with almost nothing to show for it. A good internet marketing strategy must combine search engine optimization (SEO), social media marketing and email marketing. The idea is to exploit all possible avenues that can drive a steady stream of potential customers to your website.

5. Poor Cash Flow Management

Online startups are first and foremost businesses. One of the biggest mistakes many founders make is to think that startups are immune to the fundamental business principles that determine the success of brick-and-mortar enterprises. None of these principles is more important than cash flow management.

Indeed, the overwhelming majority of online and offline businesses fold up due to cashflow problems. The trick in managing cash flow is keeping costs low, delaying expenditure for as long as you realistically can, and ensuring a consistent inflow of cash.

Some startups are bound to fail despite their founder’s best efforts. Many however fail for completely avoidable reasons. Paying attention to the above pitfalls will ensure that your business does not fail when it doesn’t have to.

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