Most common challenges faced by startups (and some not so common)

So you’ve got a great business idea—you’ve got your why. It’s keeping you awake at night with excitement and it’s going to conquer the world.

most-common-challenges-faced-startups.jpg

However, in all the excitement of making the decision to go for it and potentially put everything on the line, founders often look through heavily rose-tinted glasses. Eager optimism can skew the perception of how things will progress and obscure these common reasons why startups fail.

According to Forbes, 90% of startups fail

In no discernible order, these are some of the most common (and not so common) challenges that all startups have to navigate through the dreaded startup valley of death and make it into that 10%.

Finances (or lack thereof)

That initial investment won’t last forever so ample cash flow is essential for startups to move forward. As companies grow, so too do expenditures such as income or inventory and founders still need to put food on the table at home. There is a fine line founders need to tread with that initial investment. The business needs to go forward but not to the detriment of the day to days of running a business.

When cash flow issues rear their ugly head—as they often do—they can hinder the progress of product development, expansion or drag the company to a grinding halt.

Looking to raise seed or series A funding? Jacob Mullins, a partner at Shasta Ventures, put together an in-depth outline of what VCs expect from startups they consider investing in.

Poor management

That boost of funding won’t go very far without solid managerial planning and many startups go under within the first year due to not considering possible (or unforeseen) pitfalls that might lay ahead. There are a number of areas in a company to keep tabs on like development, further funding, recruitment, and sales. As a startup expands, management will have to keep up the pace.

It’s not a given that founders have previous management skills. Without a solid business developer (and good leadership) at the beginning, the company can fall prey to bad decision making, inadequate communication and internal conflicts.

Initial success can even strain startups at the management level. Founders often rely on a small team of dedicated, flexible employees to wear many hats in the initial stages. As revenue and customer audience grows, ‘old guard’ team members have to adapt as their role may become narrower or they take on supervisory roles over new hires.

Insufficient marketing strategy

This is an easy one for startups to falter on as they think that their idea will sell itself. The truth is, it won’t.

If the company doesn’t hit the ground running with a solid marketing strategy, it means nada if no-one knows who you are or what you do. Startups have the challenge of implementing the best marketing strategy suited to their business idea. Additionally, as with managerial experience, most founders have probably not been marketing whizzes previously so marketing can seem like an afterthought.

The good news is that there are a wealth of resources out there to guide your bootstrapped and lean campaign including this excellent low-budget marketing tech stack from Hubspot.

Lack of a Dedicated Team

This can be especially challenging to founders who try to do everything themselves due to lack of trust (it’s their baby after all) or the need to save money on talent. Many a founder has waited until it was too late before acting on recruitment. Another common issue is the problem of keeping good workers if they aren’t invested in what the founder wants to achieve.

Train your staff well enough that they can leave, treat them well enough that they don’t want to.
Richard Branson

This is easier said than done when the piggy bank is getting lighter and multitudes of other issues are keeping the founder awake. Staff who are committed and feel valued will help immensely through the challenging times.

Scaling up

Maybe things are going well, really well! But then there come new challenges with increased demand to navigate up, over and around. When things are taking off, inadequate staffing and facilities will become apparent rather quickly.

On the other hand, some founders over-anticipate business demand and fall prey to premature scaling which, in simplified terms, entails disproportionate spending on things that are not essential to business growth at that particular time. This can be for things such as overstaffing, leasing more space than is needed or spending too much on product development before determining market fit.

Cyber Security

Tackling the issue of a security threat might not seem so obvious until it’s too late, so surviving what could potentially be a catastrophic systems breach requires startups (especially the tech-oriented ones) to be vigilant. Hackers are an ever-present threat and small startups can’t risk getting their important information such as employee records, bank accounts and any other sensitive information compromised.

Unwillingness to pivot

The original idea that initially kept the founder awake may be stifling a more logical and innovative path towards the same solution. Founders can be so stuck on what they set out to do (or be a slave to their ego), it’s inconceivable that the product/service needs changing in any way.

This can place a strain on finances and the feeling within the company that progress is going at a snail’s pace. It’s not just about the business idea either as startups can suffer from lack of pivoting in the more general business decisions such as hiring issues.

Gaining customer trust

This is another one that excitable startups might neglect to take into consideration. Things rarely get created in a vacuum so that amazing idea may be just a better version of a pre-existing solution. So it’s not a given that customers will be instantly won over. Additionally, customer trust can easily be omitted with all the other operational details to attend to.

To meet growth expectations from investors, startups often try to cram in as many customers as possible. Individual customer experience can suffer as a result.

Don’t be shy, reach out

All aforementioned points certainly don’t add up to an exhaustive list and there are a whole host of other challenges that will come up, so founders and their companies will need to be agile. However, the global startup scene has built up (and will continue to build) a solid support system so founders/startups need not go on their journey alone.

A good mentor will be of invaluable assistance for advice and just general support as they have already seen it and done it. More and more accelerator programs are popping up all over the world where founders get access to a whole wealth of support. From financial and legal advice to industry expertise and networking (both for potential recruits and further support), upgrading of skills and just the general feeling of belonging.

You might also like
It's a Blockchain — 101

It's a Blockchain — 101

A Quest for Open Source

A Quest for Open Source