Startup failure in Asia
Today “startup” has become a trend all over the world, it is easier to start a company than before, but it is also more difficult to survive. The fact is less than 1% of startup survive means for every 100 startups, less than one will survive; and for every hundred survived startups, only one or two are making over a million dollars.
For several years of teaching “Entrepreneurship” in Asia, I found that the number one cause of startup failure is founders focused too much on technology but not on business. Asian entrepreneurs are mostly technology students; they are smart and passionate about starting their company, but many have limit experiences in business. I always teach the fundamental “startup” formula: “Find customer first, build the company later.” Entrepreneurs can start with an idea and build a prototype then try to find customers who will pay for the product if they complete it. Unless they have enough customers to justify the business, they should not start the company.
The second reason for startup failure is teamwork; Asian entrepreneurs are good in technical but not in teamwork. Conflict among team members happens all the time, and that is why many startups failed. Team conflict often happen when revenues are flowing in, and members begin to position themselves for certain roles and benefits before the company is stable enough to survive. Members of the team must understand that they are part of the whole. Each member has a role to play and to contribute accordingly. Startups should have strong leaders who ensure that every member is functioning to the best of their ability.
In startups business, there are many ups and downs because things change, market changes and technology changes. What was a good idea last year may not be valid today so startups must learn to be flexible and adjust quickly to meet the market demand? The third reason of Asian startups failure is reluctant to change. For many years of teaching “Entrepreneurship,” I never see an idea that last from the beginning until the end. Ideas always change as well as products; that is the nature of startup to meet market changes. Entrepreneurs must be flexible and change their product to meet market demand. That means they must be “lifelong learners” and always ready learn new things. The best entrepreneurs learn quickly from their own experience. They learn from mistakes, learn from failures, learn new technology, learn about the market, learn about customers, and learn about business. If they do not like to learn and adapt, they will fail.
The fourth reason for many startup failures is overconfident in their idea. The startup is risky; there is no safety in this business. To succeed, entrepreneurs must monitor the market to understand the current business realities and ready to react to any risks. Many Asian entrepreneurs have the tendency to focus on their own view and ignore the current market changes. They rarely monitor the market trends, they do not read technology news, many have limited knowledge on what happen outside of their country. Even they are proud of themselves on “Not give up” to market pressure but few realize that startup business is full of competitions and competitors can come from any country and may not from the same country. A lack of knowledge about the global market, even a small mistake can lead to a business disaster.
The fifth reason of startup failure is the inability to deal with market uncertainty. Asian entrepreneurs work well in a stable market where they can plan, organize and execute. However, in crisis, many team members are often frustrated, and conflicts often happen. A good team should draw on each other’s strengths, and help others to deal with the issues. The management method called “distributive leadership,” step in and take responsibility when need, and step down and allow others to take the responsibility is still a new idea in Asia. Many people assume titles and position as a power and reluctant to allow others to step up, even they cannot deal with the crisis, and that is one main reason to bring down the startup. Entrepreneurs need to learn how to step up when there is a crisis and deal with the things that slow the work. Fix the problem, not to blame others. And alleviate the conflict, help the startup recovery.
To succeed in a startup, technical skills are not enough. Entrepreneurs must learn to work under pressure, ready to change when market changes and look at problems as a challenge to overcome, and keep an open mind for learning, including learning from failure. As entrepreneurs, they need to understand that they cannot succeed without a focus on risk-taking and without working together to achieve the common goals.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
