Startup fails due to so many reasons, it is estimated that more than 80% of startup fails during first 3 years of launch. Problems comes in every business but large organizations are strong enough and have contingency plans to cope with any difficulties and uncertainties. But startups doesn’t have that strong immune system in place to save them in crisis.
Let’s have a look at the 5 startups which failed due to funding problem apparently, but there are so many other reasons that can be recognized.
Circa was a startup which focused on creating News platform, the aim for this platform was to provide News to the readers that are truthful, encouraging diversity and empowering users.
Capital raised for this product was from different sources and mostly from individuals including venture capital named Advancit Capital.
Circa News was unable to cope with expenses, they built the platform to monetize Circa News but the capital to implement that platform was not enough.
- News platform can be a good business asset or unit but cannot be a core business itself when there are Giants already in the market.
- Burn Effect is really crucial to focus in startups, You burn more cash then you generate is the ultimate disaster for startups.
- Do not underestimate the market and overestimate your abilities
Zirtual’s idea was to provide virtual personal assistants to people who are really busy in their work in order to complete their specified tasks.
Capital raised for this startup was from various sources including corporate venture, Angel investor and Venture Capital. Total funding received was $5.2 million.
The company hired too much staff in the beginning, expenses were greater than the income and growth was stagnant.
- Cash is the King in every startup, because if you ran out of cash then you cannot continue
- Scalability if easy to achieve, should not be done in the beginning wait for the balance of supply and demand factors
- Revenue generation must be analyzed accurately in the business plan, overestimations kills
An Indian based startup, focusing on premium content including magazines and Media content. The vision was to provide users with premium content which they will pay for.
Not enough money was raised for this startup, just few local investors did the job. The company was far away from venture capital to secure funding for their future.
Founder of PatterBuzz said, “We always had a problem that we did not have enough cash in our bank”. But this was not only the reason for this failure.
- Do not think for the product or service to sell, when it is supposed to be free
- Content is like a tree which demands Water, Sunlight, Air, Fertilizers for Ages then it is able to provide you with shade and fruits
- Content shouldn’t be considered as a core business rather as a business unit.
Founded and started by Aaron Fleishman former manager of mergers and acquisitions in Microsoft. Wardrobe Wakeup was a web based subscription service which was connecting users to stylists. Users were able to explore designer clothes and then fill out the questionnaire. Based on that questionnaire, users were connected to the Stylists. Stylists used to send 1 alternate item to the user for unlimited use and no obligations for further purchase.
It was solely a self-funded project by Aaron Fleishman a former manager in Microsoft.
The basic failure of the product was insufficient funding. Fleishman said, “We were unable to secure any external funding, was the reason of this failure” Although, Fleishman saw great increase in the user’s interest and demand which was increased to 1500 people in a short period of time, but the problem was in creating a balance between supply and demand.
- Self-financing can be very risky for startups even though the idea is great.
- Secure funding before starting the project; do not think people can jump in for investment when it is started.
99 dresses was an online e-commerce platform which allowed users to exchange their clothes with other users.
99 dresses raised total of $600K in funding through Fonex venture capital. After that the company was unable to raise any funding for future.
Founder of 99 dresses was not able to convince Angel investors in time, although there were people previously interested in funding the project, he further said, “We now had very little cash left, and very little time to find someone else.”
- The idea was great but failed. Do not think that great ideas always work in a desired way
- Secure funding well in time, do not wait for last minute