In my last article, we studied the myths that some people believe about startups. In this article, we are going to see what are the startups’ vulnerabilities that lead them to failure.
Most of the entrepreneurs are claiming about lack of money in their business as a startup and they usually undertake a floppy approach to raise those funds which they think is necessary for their startup. But the fact is that this sort of approach is going to make a startup business very vulnerable and puts the entity into fatal risks. We should understand that a startup is a risky alignment of business plans that tend to grow very big in a specified time frame and when you think big, you are inviting fluctuations and a lot of hassle into your career life. And unfortunately, this is definitely what those money lenders and fundraisers try to avoid; fluctuations!
When you are talking to a finance manager in a bank or any fundraising entity, the last thing they want to hear is that your business is going to fiddle with hassles and fluctuations; but WHY? Easy, they like to invest in safe places which can guarantee a steady cash flow instead of investing in an idea that even you are not willing to invest in it yourself, so why should they?!
The dark side of this story is that you get embarrassed very soon to see the same repeated answers by the money lenders from different sources; in this phase, the entrepreneur is willing to pay any fees for interest rates or any amount of shares to a lender that is just going to have faith in their idea. In my humble opinion, most of the younger entrepreneurs are challenging themselves and are trying to prove that their idea is going to perform great in this phase of the business instead of focusing on implementing the core idea as the main equity of their upcoming great business. Usually, these entities, are easy and good targets for black-hat business runners and crooks. They screw up the poor entrepreneur as a piece of cake leaving them totally helpless and buried under big chunks of interest dues or fatal lawsuits of due shares.
As I mentioned in my previous article, money is the last thing you need for your startup. So please be beware of this common mistake:
“I need money to get my startup launched.”
The main feature of a startup should be its capability to be a self-starter and becoming a pure money generator machine; so if you came to the point that you need money to fuel your startup, then I strictly recommend you to reconsider things from the beginning with more attention this time! Otherwise, you are putting your business and yourself into serious risks. This is one of the main reasons that most startups in the world and especially in Iran, are confronting sever issues at the very first year of their formation; they think they have a great idea and it’s worth to take that expensive loan because if the business rocks, the loan will be paid back by pennies. But I have a question here: what if it doesn’t rock?
Nature of the startup business dictates that most of the ideas may not work in the real world though they were great on paper.
Other vulnerabilities of a startup were somehow mentioned in this article indirectly, so I will address them quickly once again:
- The hassle included in the business
- The fluctuations on the way
- Failed even with inexpensive funds!
I might think that, ok I got a great idea and I’m on the roll! A good idea is not really all you need for a startup; this business is inviting you to fight against a lot of daily hassles. They won’t credit you in your university or corporation etc., or they might find it easier to close your business than to incubate it. Your partners might not have the same outlook of the idea as you have so they can compromise to outcomes much lower than what you have had come up with in your business plans. You have burdened your team to speed up with the new client’s need and they are not willing to renew their contract because of financial issues!
You should be ready for all the challenges involved as the road to your goal unfolds.
There is a difference between the time you go fishing on the lakeside in a calm summer noon and the time you want to harvest that hundred tons of Tunas in the Pacific ocean in winter. When you think of a startup, you should talk natively the culture of fluctuations, or please forget this business. You may want to be waiting for a new confrontation in every single day of your growing. You may achieve incredibly big gains in a month while you may not see even a small move after several months in the same business. Be ready for the bold ups and downs in your startup.
I had great supporting funds, but we still failed!
The last issue for startups, which is almost dedicated to Iranian businesses, unfortunately, is that even with safe and supporting funds they fail sooner or later. A case study shows that this is becoming very common among Iranian startups recently and they are going to rethink their strategies for funding startups and bank headquarters, as far as I know.
But why would a startup fail even with supporting funds?
As an entrepreneur, you should acknowledge the real equity of your business; have you ever thought about it? Most of the entrepreneurs in Iran evaluate their business by how much funds are injected into their business and how much money is turning around there. How much expensive equipment have they been buying or how many expensive researches they could fulfill? These have become the essence of the values of a startup in most of the young Iranian entrepreneurs while they are actually anti-values elsewhere.
The real equity of a startup is the core idea and the mindset behind it, period! So if we fail to understand this simple rule, we will lose the business for sure even if we are funded by millions of zero interest dollars.