For fast-growing companies, raising sufficient venture capital causes celebration. However, some VC-backed startups don’t reach maturity. Failure of venture-backed startups is not ground breaking news. Those startups are risky investments and the following are the main reason why they fail.
1. The product is only needed for a short term
Some startups produce good products that only appeal to early adopters. Such products are good in the first few years. As the business grows, the business products fail to attract more customers. Therefore, if you think people can live without your product, do not look for outside capital.
2. An unstainable business model
It is common for unprofitable firms to get very significant venture capital that allows them to operate unprofitably for many years. Many founders think that their companies are failing to make profit because they aren’t selling a lot of products. However, if the economic model that support their business is unprofitable, their assumption is fallacy.
3. An inept senior management team
If your company does not have a forward-thinking senior management team to set the appropriate course for your business, then your startup is doomed. The fate of the company is determined by the senior management team.