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Avatar Author 11 Jun 2024

The Percentage of Startups Failing in India.


India is amongst the fastest-growing startup ecosystem globally, with a rapidly increasing number of entrepreneurs pursuing their innovative business ideas. While this rise in numbers is impressive, it is equally important to understand that not all startups become successful. Ironically, a significant percentage of them eventually fail within just the first few years of operation.  

Countless startups are launched every year but only a small percentage survive the competition and accumulate maximum profit. Studies show how only 20% of startups survive for more than 5 years and only 8% manage to survive beyond 10 years.  


As per a study conducted by the Institute of Business Value and Oxford Economics, 90% of Indian startups had failed within the first five years of operation. This high rate of failure was a result of several factors including the following: 

  • Lack of market demand 

  • Insufficient funding 

  • Poor business planning 

  • Inadequate mentoring 

  • Strong competition  

However, the prime reason behind this failure is due to misreading the market demand. This has been found to be a common problem in 42% of cases. Other contributing factors include a weak founding team (23%) and being left behind by competition (19%).   


The important thing to be highlighted here is that experience alone cannot and does not make a team successful. As has been pointed out by the Harvard Business Review, individuals need to possess soft skills such as entrepreneurial passion and a shared strategic vision to drive success in an organization.  


How is an entrepreneur different from you or me? The mindset makes all the difference! 

Looking from the outside, it’s easy to assume that they have something different. That’s often because we only hear about them when talking in the context of business owners and CEOs of startups 


An entrepreneurial mindset refers to a set of skills that rely heavily on positive and resilient thinking. People with such a mindset look at new opportunities from a risk-prone perspective. They keep generating innovative ideas to solve daily problems. An important point to note here is how an entrepreneurial mindset is not exclusive to high-level business executives only. This characteristic can be found in anyone, whether they possess an entry-level role, are working at a large corporation, or are striking out on their own.  


Individuals possessing an entrepreneurial mindset or spirit accept leadership opportunities and are eager to learn at every possible turn in their life.  

To such a mindset, being emotionally resilient and mentally strong is extremely crucial, and when you start to feel ‘investible’, you become able to do so. Without this mindset, your chance of raising funds becomes extremely low.  

As challenging as the name sounds, entrepreneurs also go through mental health challenges throughout their journey of failure and success.  


Startups Failing in India 


Let us look at some of the common concerns: 

Emotional disorders: 

The weight of leadership and decision-making comes handy with isolation, and often, founders may feel difficulty in confiding in their employees or investors. Most of them struggle with imposter syndrome, meaning the situation in which they feel they are not worthy of their role, or not enough capable to tackle the challenges.  

What’s more, the constant fear of failure causes enough self-doubt, that can be equally exhausting at most times.  


Mental health: 

The pressure of entrepreneurship can severely impact your mental health. Common issues that are more widespread among founders include anxiety and depression disorders. Personal relationships can also suffer during your startup hustle, which can further impact the relations that you share with your loved ones.  


Team conflicts: 

Managing diverse teams and handling internal conflicts can be emotionally draining for entrepreneurs. At the end of the day, we are all humans, and what entrepreneurs try to do is not only emotionally demanding but challenging as well. 


Work-life balance: 

Startup founders work long hours that encompass weekends and holidays at times. This work-life imbalance can negatively impact personal relationships due to lack of attention and burnout, when not managed properly.  


Operational pressures: 

This includes the decision fatigue and financial anxieties that come with operating a startup. The weight of endless decision-making can often be overwhelming. As startup founders need to make countless decisions daily, ranging from product development to hiring and marketing strategies, it can cause decision fatigue that eventually leads to mental exhaustion.  

Furthermore, an even more challenging task is to balance personal and business finances, especially with investor pressures. Individuals may go through extreme stress and anxiety while managing limited funds and personal financial sacrifices. 


External factors: 

Performance pressure: The constant pressure from investors, employees, and even oneself to meet the revenue targets and growth, can often lead to immense anxiety and stress.  


Startups Failing in India 


Risk and uncertainty: It is obvious that startups are risky, and the founders invest a lot of time and money into them. Dealing with such a high level of uncertainty can be significantly emotionally draining.  


Competitive stress: The startup world is filled with fierce competition. The constant comparison between competitors creates stress and self-doubt. Witnessing fellow companions succeed can also lead to envy or feelings of impatience.  


Despite the countless challenges faced by today’s entrepreneurs, the business spirit remains a driving force for innovation and economic growth. The startup ecosystem, in a vibrant market like India, holds immense potential for these startup founders. Entrepreneurs bring change, driving industries forward with their innovative ideas and risk-taking abilities. However, the high rate of failures highlights the importance of not only having a great idea but also understanding the market, planning carefully, securing sufficient funding, and ensuring mental and emotional resilience. 


A key takeaway from these challenges is the critical role of understanding consumer psychology. This is where an MBA in business psychology and entrepreneurial psychology can be a game-changer for aspiring entrepreneurs. By understanding the psyche of consumers, entrepreneurs can better predict market demands, customize their products and services more effectively, and create compelling value propositions that connect with their target audience. Understanding consumer behavior, motivations, and preferences allows them to develop marketing strategies that truly resonate, thereby increasing their chances of success. 


An MBA in business psychology and entrepreneurial psychology helps you develop a unique skill set that combines business acumen with psychological insights. Such a combination brings forth a deeper understanding of human behavior, invaluable for market research, product development, customer service, and overall business strategy. Entrepreneurs with this background can easily navigate their way through the complexities of human behavior, predict trends, and make informed decisions that are aligned with the needs and desires of their customers. 


To conclude, while the entrepreneurial journey is fraught with challenges, it is also filled with opportunities for those who are prepared, at the same time. The fine blend of an entrepreneurial mindset with psychological expertise can give you an edge in today’s competitive startup ecosystem. By understanding the emotional and mental aspects of entrepreneurship and leveraging psychological insights, aspiring entrepreneurs like you can build strong, customer-oriented businesses that stand the test of time. 

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