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Why are startups failing? Here’s how to save yours.

By Tahira Bhasin 27th January 2023

Everyday there is news of a startup failing. Many startups have been facing difficult times and are struggling to be profitable. Startups such as GoMechanic, Swiggy, ShareChat and many more have been forced to lay off employees and make other difficult decisions in order to survive.

This has not only been challenging for the employees affected but also for the startups themselves as they try to navigate a challenging economic environment. The situation has highlighted the importance of startups finding ways to increase efficiency, reduce costs, and generate revenue in order to become profitable and secure their future.

There could be many factors behind this failure. One of them is heavy dependancy on funding. The question that arises is that can startups be profitable by utilizing technology to its full potential?

Technology and Startups

Starting a business can be an exciting and daunting endeavor. One of the biggest challenges for startups is figuring out how to become profitable while also minimizing dependence on funding. Fortunately, technology can be a powerful tool for achieving these goals.

In this blog post, we’ll explore some ways startups can use technology to maximize profit and minimize dependence on funding. But first, let us have a look at why are startups failing?

Why are startups failing?

There could be many reasons behind the failure of a startup such as market problems, failure to scale and repeat, lack of product market fit, poor management and cash burn.

However, if you are smart and cautious enough, you can save your startup by investing in technology. Local commerce players can leverage technology to grow, scale and repeat, that too, at low costs.

Let us go deeper.

Product market fit

Product market fit is simply the assessment of how good a product or service is. If your product has no utility or doesn’t solve a problem for the buyer, what good is it? You need to look for a gap in the market and then develop a product that fills that gap.

Look at Zerodha for instance, one of the most successful unicorns in the country. They analyzed the brokers in the stock market industry and found a gap that everyone needed a solution to.

Constant cash burn

Cash burn has been a major issue for Indian startups in recent years. Startups today try to boost their growth rate by pouring huge amounts of money into marketing and attracting a lot of new customers all at once. But when the losses pile up and they have no profits to negate the losses, the investors start building pressure and they are forced to cut expenses.

The inability to focus

Over-ambition is one of the biggest reasons why startups fail. Most startups lose track of what they actually set out to do or simply try to achieve too much as a brand. As a brand, you should focus on a core product and try to improve its quality to a level where no other product or brand in the market can compete with it. 

Take Zomato for instance, the brand started with food delivery and then acquired the grocery delivery brand Grofers to launch their 15 min grocery delivery arm Blinkit.

Now Zomato was already struggling with generating profits from the food delivery business and they acquired another loss-making venture to add another layer to their problems. It is now their plan to launch inter-city deliveries so people can enjoy famous local delicacies across the country.

How technology helps?

  • Automation: Increasing Efficiency and Reducing Costs

Automation can be a game-changer for startups looking to increase efficiency and reduce costs. By automating repetitive tasks, startups can free up time and resources to focus on more important tasks. For example, startups can use automation to handle customer service inquiries, to schedule social media posts, and to process payments. Let us give you a few scenarios from a business point of view.

For instance: A startup in the food delivery business can use automation to schedule delivery routes for their drivers, reducing the time and resources spent on manual route planning.

Here’s another example: A retail startup can use automation to handle customer service inquiries through chatbots, which can answer common questions and help customers place orders.

  • Local commerce: Reaching a Wider Customer Base and Increasing Revenue

The rise of local commerce has made it easier than ever for startups to sell products and services online. By setting up a local commerce store, startups can reach a wider customer base and sell products 24/7. This can help startups increase revenue and reduce the costs associated with maintaining a physical storefront.

Here’s an example: A clothing startup can create a local commerce store to sell their products online, which allows them to reach more customers at lower costs.

  • Cloud Computing: Reducing Costs and Increasing Scalability

Cloud computing can help startups save money and be more scalable. Instead of having to invest in expensive hardware and software, startups can access the resources they need on-demand through the cloud. This can help startups reduce costs and be more agile as they grow.

For an example: A startup in the software development business can use cloud computing to store and access data, rather than investing in expensive servers and hardware.

Or maybe, A startup that provides online courses can use cloud computing to host their courses and provide access to a larger number of students without the need for additional servers.

  • Artificial Intelligence: Improving Processes and Making Data-Driven Decisions

Artificial Intelligence (AI) can be used to improve processes, automate tasks, and gather insights to help startups make data-driven decisions. Startups can use AI to analyze customer data, predict customer behavior, and provide personalized recommendations. This can help startups increase revenue and improve customer satisfaction.

For example: A startup in the finance industry can use AI to analyze customer data and predict customer behavior, which can help them make data-driven decisions about which products and services to offer.

Here’s another example: A startup in the healthcare industry can use AI to analyze patient data and improve the accuracy of diagnoses, which can improve patient outcomes and reduce costs.

Also Read

Layoffs: How Job Loss Can Spark New Opportunities?
  • Marketing: Optimizing Efforts and Reaching More Customers

Technology can also be used to improve marketing efforts. Startups can use SEO, PPC, and social media marketing to reach new customers and promote their products or services. By using technology to optimize their marketing efforts, startups can reach more customers and increase revenue.

Let’s understand it this way, for instance: A startup in the beauty industry can use social media marketing to reach new customers and promote their products, which can help increase revenue and brand awareness.

Here’s another example: A startup in the travel industry can use SEO to improve their search engine rankings, which can help more customers find their website and increase revenue.

Startups should not overly depend on fundings 

In addition to the strategies outlined above, it’s also important for startups to understand why they should not overly depend on funding.

First, seeking funding can be a time-consuming and uncertain process. Startups need to spend a lot of time and resources on creating a compelling pitch, and even then, there’s no guarantee that they will secure funding. This can be a distraction from the important work of building and growing the business.

Second, depending too heavily on funding can lead to a lack of focus on profitability. When startups have a steady stream of funding, they may be less motivated to focus on cost-cutting and revenue-generating efforts. This can lead to a lack of financial discipline and a lack of urgency to become profitable.

Third, depending on funding can limit the potential growth of a startup. Investors often want to see a significant return on their investment, which can lead to pressure on the startup to grow quickly and take on unnecessary risks. This can be detrimental to the long-term success of the business.

Final thoughts

Overall, startups should not overly depend on funding and should focus on becoming profitable as soon as possible. By using technology to increase efficiency and revenue, and by focusing on cost-cutting efforts, startups can achieve profitability and minimize dependence on funding. This will not only increase their chances of long-term success but also give them more control over their own destiny.

At Jungleworks, we have technology designed specifically for startups. Through our flagship products, startups can start, deliver and market themselves in the most profitable manner.

Also Read

Jungleworks Year-In-Review: 2022 dedicated to local entrepreneurs
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