Why the startups fail?
How to make a Startup successful?
When we were doing research on Startups, we came across the statistics that close to 30% of the Startups fail as per official statistics of Government of India. However, we have also learned that actual numbers are close to 90% as some of the failed startups does not report its failure or fold.
Upon deeper analysis (and also validating with AI tools) we discovered the reasons for the failure:
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Lack of Product-Market: Solutions built without validating demand, e.g., hype-driven apps in quick-commerce failed on retention amid high CAC/low LTV. In certain cases, there is no real demand for the product or service
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Funding Shortages/Cash: Over-scaling during 2021 boom led to runway exhaustion post-2022; 60% funding drop forced pivots or closures. Some of the cases are poor financial management.
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Team/Leadership Issues: Misalignments, talent retention struggles (vs. Big Tech salaries), and governance lapses like founder disputes. Conflict among the founders a weak team are some of the key reasons.
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Competition/Saturation: Crowded markets (fintech/e-commerce) where clones couldn't compete with giants like Flipkart. Starting in a saturated market with mature seasoned players.
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Regulatory/External Shocks: Policy changes (e.g., 2023 RMG gaming ban), taxes, and inflation; ~37% of 2025 closures linked to compliance. COVID was one of the classic examples of external shocks. Navigating regulatory compliance requirements is a challenge for many of the failed startups and many of them were blind to such compliance requirements.
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Operational Inefficiencies: Poor planning, execution gaps, and failure to adapt to post-COVID realities. Weak business model that was built on ‘deep discounts’ to book sales without volume that led to collapse.