20 REASONS WHY STARTUP FAIL SERIES- RUN OUT OF CASH
If you have been following these series, you will understand that most startups especially in Africa fail majorly because of NO MARKET NEED
. That is what entrepreneurs failed to understanding.
Number two reason why startups fail is because they run out of cash. It is amazing that many brilliant startups popup but because they used all their financial strength building the product and they hit the wall and shut down.
Brilliant and potential driven Startups or businesses are major focus of VC (Venture Capitalists) or Angel Investors. Because of their financial strength, they can lavish any amount on any idea or startup they believe the can make their profit and if not, buy the company if it cannot catch up and resell to another investor.
This major reason send many startups in Africa to their early grave. I will be listing what actually caused running out of cash
1. OVER SPENDING ON LESS IMPORTANT THINGS
If you ask any entrepreneur, what will you do with ₦200,000.00 (₦ is a Nigeria Currency), he will answer and say I will build the product with the best features at ₦190,000.00 and run the product with the remaining.
Those who answer like that will run out of cash and their startup will fail. They forget the rule of START AND THINK LATER
2. SPENDING ON PERSONAL NEEDS
This is the killer of many startups in Africa because their cultural beliefs. An average African will spending his last penny setting up his sitting room. Investors will lavish money on your startup if they see a future and profit in it and the idea originator(s) founder and co-founder will be distracted thinking they can be getting such forever.
They will spend, buy luxuries, mansions, cars and play around not spending on their startup and at the end of the day, it hit a brick wall, they will run into debt, VC will take up their company and they may probably be jailed.
3. LOW FINANCIAL PROJECTION
From the development phase, a startup should be able to project their financial stand, what will be the cost estimate of production, how will it hit the market, miscellaneous etc. But entrepreneurs especially in the tech scene believe in their coding and software development strength and not thinking about their financial stand. That is why most tech startups fail, they run out of cash.
This post is from my experience especially when starting the Tinko Project,
though not shut down. We thought our ability to build the solution will be the best, but it hit the brick wall when we ran out of cash because we could not even be able to pay for advertisement and we could not reach the market.
Just sit tight and project your financial expectation as you build your startup, that will make you avoid number reason why your startup may fail.