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Start-up Failure And The Bright Side Of It.

Fist of all, yes you read that right!

We are going to talk about the benefit of a startup failure today, for every coin does have the other side to it.

So let’s begin!

No matter how heart-wrenching it might sound starry-eyed entrepreneurs. Companies fail. It’ is. unsettling fact.

 But what I we told you that has some good news as well?

But we have some good news to tell you about this as well: Skilled entrepreneurs know that operating a company that ultimately flunks can actually help a career, but only if the executives are willing to view failures with a prospect for improvement.

The statistics are heartbreaking no matter how an entrepreneur defines failure. If failure means liquidating all assets, with investors relinquishing most or all the money they put into the company, then the failure rate for start-ups is a shocking 30 to 40 per cent. If failure refers to going awry to see the projected return on investment, then the failure rate is 70 to 80 per cent. And if failure is defined as proclaiming a projection and then falling short of meeting it, then the failure rate is a whopping 90 to 95 per cent.

All it comes down to is that when you talk of start-ups. Failure is the norm.

So the question is, 

WHAT MAKES A STARTUP FAIL?

Let us just give you few quick reasons for the failure of a start-up so a) you can avoid b) you can learn.

Because a wise man once said, a fool learns from the mistake of oneself while the wise learn from the mistake of others.

  1. Start-ups often fail because founders and investors ignore to look before they leap, rushing forward with plans without taking the time to understand that the base hypothesis of the business plan might be wrong. They believe they can foresee the future, rather than trying to create a possibility of it with their customers
  2. Next, there’s the matter of timing, a huge problem that can determine whether a company gets funding and whether it achieves the start-up’s ingenious measure of success: an exit that pertains to going public or getting bought. 

For instance: remember how during the internet boom, companies with nothing more than Powerpoint Presentavagueith a vague idea tried to join in and well succeeded.

They scored millions of dollars which in turn gave them time in hand to perfect their ideas and work. 

Personal Vs Enterprise failure 

We told you in the beginning that an Enterprise failure can be an asset. But that applies just when an Enterprise fails, meaning that we are not talking of personal failures. That can be ruinous.

A lot of stubborn entrepreneurs continue to found companies, in spite of the failure rates, which puts forward the question of why. It’s not as if any of them saw some childhood fantasies of launching a search engine optimization software firm.

Sometimes this is due to naïveté and in some extents because of the overconfidence -the idea that their idea simply cannot fail. But savvy entrepreneurs know that running a company that eventually fails can actually help a career. Even businesses that fail end up yielding future networking opportunities with venture capitalists and relationships with other entrepreneurs whose companies are succeeding.

At the end of the day as far as when it comes to starting -ups, networking is important. Very important.

In a start-up, if a company is doing well and a founder gets ravenous and takes more than his fair share, people sort of forgiving him, but when a company is going down and you protect your own dividends it’s always at the cost of someone else. People don’t forgive that.

Ironically a personal failure often arises because an entrepreneur is trying too badly to avoid enterprise failure. Trying to keep the venture capitalists happy and bankruptcy at bay, the founder or CEO will resort to illegal acts such as fraud, or to morally disturbing acts such as egregious misrepresentation of the company’s capabilities or expectations when talking to customers or financiers. And when you do that, you’re then on the slippery slope of taking an enterprise failure and making it a personal failure. Executives often fall in this vicious circle because they do not distinguish between the two.

WHAT TO EXPECT?

 Venture capitalists could help mitigate personal failures by enabling for the expectation of the company growing pains.  In entrepreneurial management, there’s a tendency to see things in black and white, rather than looking at the whole picture. And while VCs are likely to enlist an executive with understanding of a failed company, they are less patient with individual failures. VCs rarely contemplate their role in ascertaining utopian expectations or an atmosphere where the ends are more crucial than the means.

In any natural system. Failure is a norm, one can never grow new trees without cutting or burning the former one, and much like in slash and burn cultivation. In business as well, the ruins and remains of your former cultivation serve as fodder for your current venture.  

The only catch that remains is the ability to make sure that even when an enterprise fails, a person should never. 

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