Published on January 2nd, 2019 | by Jose Vasquez0
What Are the Biggest Reasons Startup Tech Companies Fail in the First Year?
Startup tech companies often fail in the first year, but why?
You may have heard the statistic that 90 percent of startups fail in their first year of operations. This isn’t exactly true—it’s more like 50 percent of startups fail in the first 5 years of operations—but still, the threat of failure is heavy on any entrepreneur’s mind.
So why is it that startup tech companies fail so often in their earliest stages of development?
- Lack of funding. If your business needs money to operate (i.e., securing raw materials, paying people, and maintaining your building), you’ll need funding while you’re in a pre-revenue stage. But if you aren’t able to secure that funding, or if you burn through it too quickly, your startup can quickly collapse.
- Cash flow problems. On a related note, many startups struggle after experiencing cash flow problems. You’ll need to carefully manage how much money you’ve got coming in, how much funding you have, and how much money you’re spending on a regular basis. If you aren’t carefully managing these financial areas, you could come up short.
- Delays and unexpected costs. If it takes too long to get your product to market, or if there are unexpected costs interfering with your profitability, your financial projections could be rendered obsolete. Unanticipated changes in market conditions can wreak havoc on any business plan.
- No matter how original your idea is, competition is a very real threat. If a company gets to market faster, has a better brand image, or offers what you offer but at a better price, it can eat into your profitability.
- Brand perception and customer needs. Sometimes, it’s just a matter of how your company is seen among your target demographics. If people aren’t interested in what you’re selling, your company can’t last.
These are just some of the most common reasons why startup tech companies fail. If you can learn to avoid them, you can greatly improve your chances of success.
If you’re interested in guarding your tech company against failure, contact me today! I’ve helped dozens of entrepreneurs take their startups from mere ideas to thriving businesses.