What’s lead to Failure of Start-ups

A Cuppa Academy

2019 has gone with many news regarding failures of Start-ups, especially in Thailand when DTAC Accelerate announced that they are closing down as they do not making any money for 7 years consecutive. For many years, we have seen so many Start-up competitions supported by either public or private sectors in Thailand. DTAC Accelerate was one of the biggest start-up competitions as well as a private fund in Thailand; it has been founded about the same time with Krungsri Rise, AIS, DEPA, Start-up Thailand, etc. With these competitions, the winners won the first investment, and then they go to the next competitions to get another to raise more funds, they’d do like this till they become grown-up start-ups. Apart from Thai Start-ups who have failed to grow up, there are also foreign start-ups who have set their operations in Thailand that are recently fail or in a so called “zomby” status either by choice or forced to be.

Consider the start-ups who have failed or in the Zomby stage, they were mostly driven by technology, and concerned only whether it is feasible, which they have been forgot about the bottom line that every businesses aimed for which is making profit, not even the maximize profits that is fundamental objective of economist, nor maximize sales that is the aim of marketers.

In my opinion, there are only two reasons why the start-ups failed, which are:

  1. The businesses are not viable —Some of them did not understand well of how to run their businesses. Some of them could not complete with their competitors. Some of them did not have a well cost-revenue management. Many of them answered their users’ needs, yet can’t make money as the users did not want to pay for their innovations, i.e. their products are not desirable or it can be easily be substituted or replace by its direct / indirect compeitiors.
  2. People — there are two important groups of people to be considered here, namely users and founders (management of the Start-ups). Many start-ups developed their products based on their founders’ ideas, some have been validated by panelists and judges of Start-up Competitions, but not the users. These could be resulted in undesirable innovation as the users may not willing to pay for these innovations. Some are worse, have never been validated the ideas at all. These are the vision of the founders who made decisions on what and when to be developed and launched; if they believe in themselves, then the innovation are unlikely to answer the users’ needs not be desirable for the users. Another big issue on people is the management skills and vision of the founders or management team. If the founders / management team do not have a well understanding of how to run the business, esp. marketing management, financial management as well as human resource management; it will be very difficult to make money at the end of the day. Decision-makers are very important in running any businesses not just start-ups. The founders should have not only technical skills but also leadership and management skills in order to grow their start-ups and make the real money, not living on fund raising.

In order to become grown-up start-ups, innovation or technology alone is not enough. We need the innovation that is a “real-win-worth it” innovation. “Business” and “people” plays a huge role toward success of the businesses. “Business” includes but not limit to business model, value propositions, revenue stream, cost structure; it should answer whether this business is viable or not. People are those management team, users, and every stakeholders who involving with developing and validating the products; to answer whether the innovation is desirable or not. Once the innovation is desirable by the users; it means the users are willing to pay for it. So at least the business will have customers and make some money.


Photo Credits:

Photos by Startaê Team, Austin Distel, Ben Kolde, You X Ventures and Proxyclick Visitor Management System on Unsplash

This post was originally published on Jan 2nd, 2020 by Suthasinee Susiva, PhD under A Cuppa Academy Publication at https://medium.com/a-cuppa-academy/whats-lead-to-failure-of-start-ups-7a72c8a1b8a2