Starting a tech startup business from scratch is the most challenging process that forces novice entrepreneurs to give up their efforts. Running a tech startup looks like a complex action, and several youngsters love to start their careers in such a place where there is a new environment to develop their skill set.

But tech startup failures have become common these days as several beginner entrepreneurs come up with innovative ideas to transform them into a million-dollar business. Though the visions are creative and groundbreaking that keep up with the pace of technological evolution, so many tech startups fail and get drowned in the sea of million businesses.

CB Insights analyzed several data on startup death and found that 70% of upstart tech companies fail, usually around 20 months after first raising financing.

Research says that 90% of them fail within the initial three years. Another study found, 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.

Let us discuss the reasons for tech startup failures and how to avoid them.

1) Missing Out On Work Culture

Work culture is one of the essential features that have the power to make or break your tech startup. A good working environment can benefit their employees by increasing their comfort within the workplace and sparking their creativity.

Glassdoor’s Mission & Culture Survey conducted in 2019 says that nearly four in five employees and job seekers analyze a company’s mission and culture before applying for a job. It also reported that 65% of employees aged between 18 and 34 years are more likely to place work culture above their salary when it comes to job satisfaction.

Negative workplace culture can decrease the productivity of your employees and your business, leading to higher employee turnover. Because of this, several tech startups fail.

If you are an entrepreneur who is just starting with your tech business, determine the core standards and morality that suit your business and let them shape your company’s work culture. Ensure that you communicate this to your human resources department to convey your work culture to potential new hires so that they hire good fits for your culture.

2) Ignoring What The Employees Want

The millennials of this generation rule the technology workplace, and some startups hire them by promising attractive perks like video games, free lunches, and in-house gyms. They make them work for long hours, and that does not mean a huge payout.

Startups might have funding issues, and they can’t afford to pay their employees the same high salaries paid by other companies. They counteract such low pay and lack of benefits by offering their millennial employees the above-said perks.

As the workforce ages, they realize the difference between what they need and what they want. Employees who are parents or primary caretakers of their family might require benefits like health care insurance and paid paternity leave rather than free lunches or in-house gyms. 

Tech Startups should work on understanding the requirements of their employees by conducting an anonymous survey. This might help you provide your employees with what they want rather than spending valuable money and time on other inessential perks.

3) Working In a Hurry To Achieve Goals

Many tech startup owners adopt the “rushed culture” policy and overload themselves with more tasks to complete in fewer days. This is one of the common reasons for the early failure of some tech companies as it has many long-term effects on the career and health of the business owners and their employees.

Do not adopt the hustle as your business plan because not all your employees might be prepared for the rushed culture or tail to coordinate with you, ending in less productivity and increased stress levels.

Take your time to work on your business plan while training and supporting each new employee. The real entrepreneur moves one step at a time, with no rush or speed. Talk to your industry experts so that you learn more from them. Also, communicate with your employees and scale an effective business plan that won’t affect what you have built so far.

4) Trying To Scale Up Too Early

Scaling is one of the most challenging processes that a beginner tech startup owner might find difficult to tackle. This problem might arise in almost every area of your business. Startup Genome surveyed by analyzing 3200 startups, and their final report says that 70% of companies fail because of premature scaling.

Premature scaling is the process of spending more money beyond the essentials for marketing, hiring, etc., before analyzing the market fit to develop the business. This is one of the main reasons for the failure of tech startups and might kill your business as this process utilizes the available cash more quickly.

To avoid such disasters, focus on doing things that don’t scale. Start simple in an affordable office and hire freelancers before hiring full-time employees. You can later adapt quickly and scale your business accordingly.

5) Poor Financial Management

Financial management is challenging for most tech startups as they need stable funds to turn their ideas into reality. Funding is essential for acquiring technological products like software and hiring the right people to develop the business. 

Startup entrepreneurs can raise funds with angel investors, bank loans, crowdfunding, and venture capital. Many startups fail due to inefficient cash flow management and get into trouble in the early stages.

Business owners can adopt several ways to avoid this. Sketch the perfect financial plan before starting the business and stick to it. Hire top financial talents like business accountants and financial advisors to help you and make the most out of the funding. 

Determine the purchasing policy suitable for your business, set up your budget policy, and analyze the expenses. Properly define the payment conditions with your business clients and study the impacts of late payments.

Final Thoughts

Are you one of those tech startup owners who have committed any of the mistakes mentioned above? It can be hard at the initial stages to manage everything in your business. As an entrepreneur, you have to learn from your mistakes and try to avoid them in the future. It is not too late to correct your errors and bounce back to work smart.


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