Here’s Why Some Startups Fail


ENKI Team - March 15, 2019 - 0 comments

With companies such as Uber, Airbnb, and Grub hub popping up left and right, it is clear the 2020’s will be dominated by startups gear towards the new “gig economy”. This is not the first time that new technology and changing economic circumstances have led to a massive wave of new businesses. Between 1995 and 2000 the world experienced a massive technological transformation as the Internet and home computers became the new normal for everyday people to have access to. This period, known as the “dotcom bubble”, led to the rise of the online startup and saw the beginnings of some of today’s industry giants such as Amazon and Google. But this period of time was closely followed by a massive downturn, as many companies that appeared during this time, such as Pets.com, lost millions of dollars in revenue and eventually shutdown within months of becoming public. So why do some startups fail?

 

One reason is that many startups lack proper work-life balance. Starting a business from the ground up is an arduous process and requires a lot of energy. Many startups choose forgo things like proper breaks and personal time given to employees, which often leads to employees burning out and losing their passion for the project. One of the secrets behind Google’s success is its dedication to making work/life balance a top priority. They allow their employees to set their own hours and properly compensate them financially. They have also designed their offices to be comfortable and fun to work in (their offices are dog friendly!).

Another reason a startup might go under is that it gets out competed by other products that are easier to use, cheaper, and/or simply work better. Before Google, the 1990’s were flooded with dozens of pre and post-web search engines like Gopher, Aliweb, and Yahoo. Google’s founders designed an algorithm that optimized keyword searches so that the most relevant data was always presented at the top of Google’s search results. Google worked better than its competition and soon became the world’s top search engine leaving the others in the dust.

Probably the most important factor in a startup’s failure is a lack of a market need for the product. Pet’s.com was supposed to be “the Amazon of pet products,” allowing pet owners to purchase their pet products online. But it turned out pet owners preferred to purchase their pet products at the local store as it was much easier and cheaper, so Pets.com quickly fell off.

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