A Startup Going Bankrupt: Why Does It Happen?

A Startup Going Bankrupt: Why Does It Happen?

Startup is the new word creating buzz all around the professional arena today. With a multitude of startup founders already running from pole to pole, just to find enough capital for their budding enterprises, immense competition has grown in similar fields.

This left aside, investors have also burgeoned in number with most of them finding high returns associated with the revenue models of a few lucrative ones. This is where the real difference is made. Getting the funder to choose your company over the other. Alas! A number of budding entrepreneurs fail to get a hold over the same and are seen closing up their ventures soon enough.

This post caters to the same audience and talks about the prime reasons for a startup to go bankrupt. Drop sufficient glances and watch out for these to save your enterprise from drowning in the wake of insufficient funds.


Competing in a Saturated Market Condition

Well, this is the reason a majority if new ventures find it hard to survive during the initial stages itself. There definitely isn’t any fault with the product/ service you seek to offer, but the market pertaining to your field runs full with competition and just isn’t ready to make a space for any new player.

It might also be happening that customers have already had enough dosage of your product and don’t require it anymore. It might sound a bit too blunt, but that’s how customer psychology happens. They don’t feel the urge to purchase, as long as they are satisfied with a particular product/ service. This surely causes the startup to struggle while finding a customer base, hence going low on funds.


A Highly Dysfunctional Team

It might happen that you’ve just begun with 3 members and slowly the team has expanded into a huge cohort moving towards mutual business objectives for the venture. Steve Jobs too faced the same problem initially. A company that saw its initial days inside a Garage with two members only and slowly expanded into a multibillion dollar brand, he never saw the entire board diverging from the initial vision.

Coming back to your case, make sure this doesn’t happen with you. Ensure that any dysfunctionality within the team is handled from the get go. Obviously, you don’t expect the investors to grant you capital after observing a team that doesn’t work in sync with each other.


Flaws in the Product

According to a reputed website, nine out of ten startups fail, which makes the success rate with a new venture diluted down to a bare minimum. Not to dishearten you in any way, but that has been more of a Silicon Valley cliché these days. For reasons are numerous to go bankrupt, flaws in the product seems like a major one.

Think about the client base you’re catering to and the product you offer. There needs to be a perfect match between the demand and supply side. The moment you lose this balance, your funds go down the drain as well.


Not Keeping Enough Financial Advisors in the Loop

Look up to any successful brand surviving in the market today and they’ll definitely have their own advisory board to take care of finance management and capital investments. Building on similar lines, it’s necessary for you to make the right hire and keep sufficient experience by your side. This way, you stay clear over the pitfalls, even when you presume things to be going fine. It’s all about being prepared for the worst, always!

Tips are numerous to save yourself the hassle of reviving from a financial loss, but it’s just the planning that pays in the end. Play smart and keep yourself at the safe end.


Anshuman KukretiAuthor Bio: Anshuman Kukreti is a professional writer and a keen follower of the global job market. An engineer by qualification and an artist at heart, he writes on various topics related to business ventures across the globe. Reach him @ LinkedInTwitter and Google+.


Next read: 5 Steps to Build the Right Personal Brand for a Startup Founder

Article contributed by Startup Jobs Asia‘s Team.

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