Why do startups fail? – Things to know for a startup

By Miss. Isha Dhaktode.

Entrepreneurial Education is Helpful for Entrepreneurial Thinking and Acting

Students enrolled in universities can gain knowledge in entrepreneurship courses; those who have ideas are supported and offered consulting and coaching services; there are plenty of opportunities for networking; and a variety of financing options are available for spin-offs. However, there is a blind spot. There is no systematic entrepreneurship education in vocational education and training at upper secondary level.
Entrepreneurship education with a strong focus on sustainability combines professional, interdisciplinary, and general education knowledge and skills. This helps provide the right answers to the rapid changes in both the economy and society in view of megatrends such as digitalization and globalization and the related social and ecological challenges. As tomorrowís entrepreneurs, todayís young professionals will help maintain and expand prosperity and innovative strength in the future while at the same time attending to the social and ecological dimensions. The current strategic initiative, ìVocational Training and Education 2030î, pursues the vision of securing and maintaining the prosperity of society on the basis of a labor market-oriented, attractive, open and recognized VET system. To this end, vocational education and training provide skills that meet the needs of society and are based on an optimal mix of vocation-specific and transversal skills; this is exactly what this initiative can provide for Entrepreneurial Thinking and Acting. (Müller et al., 2020)

Sustainability or Only the Surface of the Idea? (A study on 2019 presidential election campaign)

In the face of global fragility, social inequality, and (youth) unemployment, entrepreneurship could be essential for sustainable socio-economic empowerment. However, this is difficult to achieve without education that employs the proper methods, tools, and objectives and equally targets all society segments. Uno’s campaign narration focused more on hopes. Entrepreneurship narration he built focused on motivating millennials to be an entrepreneur without explaining the risks. The campaign also did not explain how to maintain and develop the business and access sources of capital. The Digital era does not necessarily mean that all MSMEs use technology. The narration should also be focused on entrepreneurs who do not use technology to compete in this digital era. Uno’s narration of entrepreneurship serves as learning that Uno did not highlight long-term sustainability. The basis of his campaign content only touches the “surface” of the idea. (Putri et al ., 2021)

Woman Entrepreneurs and SMEs

One of the key factors that affects the startup process of women-owned businesses is the source of financing. The results obtained during the empirical research of women entrepreneurship in Serbia are closely correlated to previous studies conducted in different countries worldwide. However, the prejudice that business is reserved only for men is hard to eradicate. The women entrepreneurs still do not have equal treatment in the business environment, often forced to show additional effort in order to deserve the trust of business partners. Despite the evidence that women-owned enterprises are more profitable and long lasting, up to this moment, women entrepreneurs tackle a rudimental problem: how to get their startup capital. Therefore, the goal is to make a change in such practice and to reassure the investors that their financial resources would be safer and more profitable if invested in women owned businesses. (Janovac et al ., 2021)

Importance of Value Proposition Alignment for Global Startups

For those able to achieve legitimate born-global status, uncontrolled growth is a good problem to have. A common cause of failure is premature scaling. Premature scaling is defined in the well known Startup Genome Report as the predominant form of inconsistency whereby firms put the product, team, financials and business model dimensions of their business far ahead of or behind the customer dimension. This speaks directly to placing an overemphasis on only a subset of a firm’s portfolio of VPs, without a coherent and scalable business model. The coherence of a business model prior to scaling remains an overlooked component of the classic Business Model Canvas, and is only achieved if the VPs and their relationship to all relevant stakeholders are aligned in a way that creates value for the startup to capture (immediately or sometime in the future if it is not immediately cash flow positive).
Modern born-global research differentiates “born-globals” from “global startups”, where the latter include globally distributed teams and markets, enabled by the operation of online offices (a trend that is accelerated today by the spread of Covid-19). While global startups are interesting, here we focus on more conventional innovative new ventures and their globalisation efforts. (Prabaharan et al., 2021).

Qualitative Analysis for Startup Business Model

Start-up founders enter the business because they want to realize their avocations and dreams, or they notice a gap in the market. The presence of start-ups on social networks and the cultivation of PR are essential because they allow building a brand cheaply and effectively. The key activities are customer communication, marketing and sales, product and service development, and product manufacturing and service provision. However, sales are a weak point of most start-ups. Partnerships are essential for resource- and process-limited start-ups, but founders perceive partners in a wide range of positive-negative attitudes and prefer careful partner choice. Start-ups achieve a lower level of costs compared to the competition because they have only the necessary resources and processes they need to survive and succeed in business making. The cost structure is dominated by wages and fixed costs prevail over variable costs, and therefore slows down the turnover of invested financial resources. Start-ups do not take much risk in sales and focus on traditional income models. As a rule, they satisfy existing, traditional practical needs with a better or greener product. Only a fraction of start-ups discover completely new needs, solve a long-term unresolved problem and develop a world-unique product/service. If such a product is found, the start-up, due to low bargaining power, is unable to translate exceptionality into a high price. (Slávik et al., 2021).

Choose a Business Incubator Who Can Best Serve Your Needs.

The incubator landscape in SA is characterised by public and corporate funding, but this raises issues regarding their relationship with their incubatees and their sponsors, which have different interests. Based on this, the research question is formulated. To what extent do business incubators (public and private) in SA meet the needs of their incubatees and do they fulfil their intended role?
Entrepreneurial leaders are considered as entrepreneurs who can contextualise their environment, recognise business opportunities and who are able to attract resources and skills in an innovative manner to take their business to the highest (global) level.
Business incubators need to be able to conceptualise and present their own business model to ensure their own sustainability and also need to be held accountable if they have received state-funding, but they have nothing to show after a few years in operations. More focus should be placed on stimulating SME growth beyond the employee of one additional employee. The one-size-fits-all approach of some business incubators must be avoided. Prospective incubatees must educate themselves to choose a business incubator that can best serve their needs, such as asking the vital questions as proposed by Campell et al. (1985): is this a good business? Does the incubator have the resources and knowledge to support my business and do they know what is the best marketing penetration approach for my business to enter the market? What are the business incubator’s success stories? (Hewitt et al., 2020).

Evaluation of Incubator’s Learning Process for Technology Based Startup

Technology Business Incubator runs the learning process for startups in three stages, including pre-incubation, main incubation, and post-incubation. These three stages are expected to be carried out regularly every year. During pre-incubation, the management team selects the startup with several stages and requirements. The tenant’s admission target is based on the university’s policy. The registrants accepted for incubation relate to the management team’s capacity and capability. The incubator provides tenants with a learning program, mentoring, seminar & The Asian Journal of Technology Management Vol. 14 No. 1 (2021): 35-56 49 workshop, funding support, and networking during main incubation. The tenants may access the free facilities during the two years (terms and conditions apply), including office space, meeting room, internet access, and other office infrastructures. After completing the incubation process, only a networking program, such as an event, is offered to the tenants. Any programs and access for facilities after the post-incubation process are not provided. During the post incubation process, the management team evaluates the incubation process’s impact limited to tenant satisfaction. A specific target, such as how many tenants are predicted to be sustainable, is not determined. According to their evaluation, three sustainable startups have already completed the incubation process. The practical contribution for a business technology incubator involves providing an overview of the learning process implementation in the startup incubation period as a guide to improving tenant’s incubation services. Evaluation of the learning process effectiveness in the incubator opens the opportunity for research with mixed methods. The aspects that influence measurements, such as the number of employees absorption in each startup, the economic impact on society, and the effect on the environment, can be integrated with quantitative data collection to obtain more in-depth results. (Ghina et al., 2021).

Business Bankruptcy: Risks and Their Impact

The article aims to discover the differences in the perception of the most significant business risks and their impact on the future of business concerning the entrepreneur’s experience with business bankruptcy
There are 428 Problems and Perspectives in Management, Volume 18, Issue 2, 2020 also differences between entrepreneurs in attitudes to the effect of personnel risk. Entrepreneurs who have no experience with bankruptcy perceive the direct impact of increasing employee performance on the company’s future. On the other hand, entrepreneurs who have gone through business decline do not perceive indicators of personnel risk, such as employee turnover, employee error rate, or increasing employee performance. Despite a representative sample of 454 SMEs, in the future, it would be necessary to re-verify the attitudes of entrepreneurs in the business environment in the Czech Republic. This is owing to the verification of the achieved results and the ongoing COVID-19 crisis. The nature of research, which deals with the attitudes of entrepreneurs from only one Central European country, is also limiting. The results are important, especially for SMEs themselves, and for state and non-profit institutions in setting up incentives to raise the quality of the business environment for SMEs. (Dvorský et al., 2020).

Overcome the Impacts of Pandemic on Startups with C-IR Framework

The COVID-19 pandemic may have various impacts on businesses across different industries, yet the businesses in industries with temporarily lowered demand could make rational decisions on whether to diversify in new markets or not to diversify at all (continue operations in an existing industry, serving the same market), which could help them avoid business failures. Firms typically make two types of mistakes in a turbulent environment. They will fail to turn a business opportunity into their favor (e.g., avoiding diversification decisions) or undertake wrong business decisions (for instance, diversify in an industry with a product with no real market need). To avoid mistakes, especially during a pandemic, when even a small mistake could lead to business closure, the Competency-Industry Relatedness (C-IR) framework is a useful guide. Startups can adopt any of the four strategic options—ignore, delay, phasein, and diversify, when making diversification decisions; with each option associated with different involved costs and risks. The analysis of the competencies and industry relatedness will help firms leverage their resources, in order to capture the opportunities in “related” industries. This will help them avoid making decisions driven by market myths and focus more on internal factors that could provide sustainable competitive advantages in new industries. Startups would also be able to diversify in related industries with disruptive technologies—even if they have small teams—as long as they have the core competencies. The key to sustained business growth is right assessments of their internal factors, as well as accurate analysis of the rising opportunities in the environment. This task could be further from knowledge transfer from innovation ecosystem elements especially through partnerships with academia [21]; the area that could set directions for future work. (Gupta et al., 2021).

AI-Powered Startup – Strategic Implications.

This study offers significant strategic implications for entrepreneurial ventures or startups seeking to scale their operations and models. First, using the case of ByteDance, AI-powered startups leverage the AI factory approach to achieve rapid growth in scale and scope. Second, our close examination of company culture and organizational structure offers startups recommendations on how to fully take advantage of AI and challenge incumbent companies. Startups are advised to design a flat organizational structure and cultivate an agile culture to improve flexibility and drive effective communication. Third, we identify challenges and risks faced by AI-powered startups. Although data risk is impossible to remove, it is important to understand its pervasiveness and strive to reduce it.
One of the main implications for VCs is the stringent need to develop expertise in regard to the various types of data risk faced by AI powered startups in their portfolio. In addition to the usual type of resources that VCs provide their firms, such as financing, and strategy consulting, developing data risk expertise takes an increasing role for their AI powered startup investments. In the case of ByteDance, its VCs had developed prior expertise regarding data risk mitigation from their previous investments in AI powered firms. (Jia et al., 2021).

Conclusion:

In this process of 10 literature reviews, many crucial learnings were highlighted in short. There are many ways to overcome failure with corrective steps and new strategies to improve or make additions in our idea for startup. We have learned how important is the entrepreneurial education to develop an entrepreneurial thinking as well as acting and how much in depth study for our startup is required for its sustainability instead of only touching the surface of our idea. Our goal should be to reassure the investors that their financial resources would be safer and more profitable if invested in women owned businesses. Correct value proposition alignment is the key to becoming a global startup with that business model helps to take effective decisions with its qualitative analysis. Founder has a clear idea and vision for their startups so they should look for incubators who can best serve their needs. Incubator’s Learning process for technology based is important to understand the crux and vision of the startup. While performing business very passionately, being aware of risks and their impacts like business bankruptcy is must. Moreover, In these COVID-19 pandemic crises, The key to sustained business growth is right assessments of their internal factors, as well as accurate analysis of the rising opportunities in the environment. AI powered startups also help to achieve rapid growth in scale and scope with significant strategic implications.
This knowledge acquired by reviewing 10 literatures is helpful to develop a good business plan for our business idea. By considering all risks, their impacts, some strategies and implications; we can have a potential startup business that can touch heights with proper execution.

References
Dvorský, J., Ključnikov, A., & Polách, J. (2020). Business risks and their impact on business future concerning the entrepreneur’s experience with business bankruptcy: Case of czech republic. Problems and Perspectives in Management, 18(2), 418-430. doi:http://dx.doi.org/10.21511/ppm.18(2).2020.34
Ghina, A., & Sinaryanti, I. (2021). The learning evaluation of business incubator’s role in developing technology-based startups at technology business incubator. The Asian Journal of Technology Management, 14(1), 35-57. doi:http://dx.doi.org/10.12695/ajtm.2021.14.1.3
Gupta, V., & Rubalcaba, L. (2021). Competency-industry relatedness (C-IR) framework for sustained business growth in startups during and beyond pandemic: Myths and lessons from publicly funded innovative startups. Sustainability, 13(9), 4632. doi:http://dx.doi.org/10.3390/su13094632
Hewitt, L. M. M., & van Rensburg, Lodewikus J. Janse. (2020). The role of business incubators in creating sustainable small and medium enterprises. The Southern African Journal of Entrepreneurship and Small Business Management, 12(1) doi:http://dx.doi.org/10.4102/sajesbm.v12i1.295
Janovac, T., Jovanović, V., Radanov, P., & Jovanović, S. V. (2021). Woman’s entrepreneurship – female participation in loss-making SMEs·. Zbornik Radova Ekonomski Fakultet u Rijeka, 39(1), 39-58. doi:http://dx.doi.org/10.18045/zbefri.2021.1.39
Jia, P., & Stan, C. (2021). Artificial intelligence factory, data risk, and VCs’ mediation: The case of ByteDance, an AI-powered startup. Journal of Risk and Financial Management, 14(5), 203. doi:http://dx.doi.org/10.3390/jrfm14050203
Müller, S., Berger, G., & Gutzwiller-Helfenfinger, E. (2020). Establishing entrepreneurial thinking and acting in swiss vocational colleges. Discourse and Communication for Sustainable Education, 11(2), 121-136. doi:http://dx.doi.org/10.2478/dcse-2020-0022
Prabaharan, R., Bliemel, M., & Tanev, S. (2021). Value proposition misalignment and the failure to become a born-global company. Technology Innovation Management Review, 11(4), 38-51. Retrieved from https://www.proquest.com/scholarly-journals/value-proposition-misalignment-failure-become/docview/2528504115/se-2?accountid=141537
Putri, H. L., & Puspitasari, M. (2021). The issue of entrepreneurship as a political gimmick or sustainability? (A study on 2019 presidential election campaign). IOP Conference Series.Earth and Environmental Science, 716(1) doi:http://dx.doi.org/10.1088/1755-1315/716/1/012099
Slávik, Š., & Hudáková, I. M. (2021). The structure of the start-up business Model—Qualitative analysis. Sustainability, 13(15), 8386. doi:http://dx.doi.org/10.3390/su13158386