A PROJECT REPORT

ON
“TO STUDY THE FACTORS INFLUENCING FAILURE OF NEW
UNICORNS IN INDIA.”

SUBMITTED TO QUANTUM UNIVERSITY, ROORKEE

IN THE PARTIAL FULFILLMENT OF FOR THE AWARD OF THE DEGREE OF
BACHELOR OF BUSINESS ADMINISTRATION
(THREE YEARS REGULAR DEGREE PROGRAMME)
BATCH-2021-2024

UNDER THE GUIDANCE OF: SUBMITTED BY:

DR.VINAY PAL SINGH SHREYA WADHWA
(ASSOCIATE PROFESSOR) BBA 3RD YEAR
DEPARTMENT OF Q-ID –
21170026 BUSINESS ADMINISTRATION

QUANTUM UNIVERSITY, ROORKEE

22km Mile Stone, Mandawar, Roorkee- Dehradun Highway (NH-73), Roorkee-
247667 (Uttrakhand), India

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 DECLARATION

I, SHREYA WADHWA, hereby declare that the project report on “TO STUDY THE
FACTORS INFLUENCING FAILURE OF NEW UNICORNS IN INDIA ”.
Prepared by me under the guidance of Dr. Vinay Pal Singh, Associate Professor faculty of,
Department of Business Administration, Quantum School of Business, Quantum University.

I also declare that this project report is towards the fulfillment of the university regulations
for the award of the degree of Bachelor of Business Administrative by Quantum University,
Roorkee, India.

I further declare that this report is based on the original study undertaken by me and has not
been submitted for the award of a degree from any other University / Institution.

Signature of Student

Place:

Date:

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 ACKNOWLEDGEMENT

I take this opportunity to extend my sincere thanks to Quantum University, Roorkee for
offering me a unique platform to extend my knowledge in the field of FACTORS
INFLUENCING FAILURE OF NEW UNICOR IN INDIA

I would like to express my gratitude and appreciation to all those who gave me the possibility to
complete this project report. Special thanks is due to my supervisor Dr. Vinay Pal Singh ,
Associate Professor faculty of Department of Business Administration, Quantum School of
Business, Quantum University , Whose help , stimulating suggestions and encouragement
helped me in all the time and in writing this project report . I also sincerely thanks for the time
spent in proofreading and correction my many mistakes.

SHREYA WADHWA

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 CERTIFICATE

I have this pleasure in certifying that Shreya Wadhwa is a bonafied student of 6th semester of
bachelor of business administrative (2021-2024) of Quantum University, Roll No – 2102301077.

She has done her project work entitled “TO STUDY THE FACTORS INFLUENCING
FAILURE OF NEW UNICORNS IN INDIA

” under my guidance. I certify that this is her original effort and has not been copied from any
other resource. This project has also not been submitted in any other Institution/University for
the purpose of award of any degree.

This project fulfill the requirement of the curriculum prescribed by the University for the said
course. I recommended this project work for evaluation and consideration for the award of
Degree to the student.

Signature:………………….

Name of Guide : …………………..

Designation: ………………….

Date: ………………

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5|Page
 TABLE OF CONTENT

Sr. No. Topic Page No.

1. Preface 6
2. List of tables 7-8
3. Executive summary 9-10
4. Chapter 1- Introduction to topic 11 – 22
5. Chapter 2 – Literature review 23 – 36
6. Chapter 3 – Research Methodology 37 – 49
7. Chapter 4 – Factors influencing 50 – 56
startup failure
8. Chapter 5 – Analysis and 57 – 91
interpretation
9. Chapter 6 – Conclusion 92
10. Annexure Questionnaire 93 – 98
11. Bibliography 99

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 PREFACE

As a part of the BBA Circular and in order to gain some practical knowledge in the field of
management, we are required to make a project report on “TO STUDY THE FACTORS
INFLUENCING TOWARDS FAILURE OF START UP IN INDIA.” The basic Objective
behind doing this project report is to get knowledge tools of different tools of marketing.

In this project report we have included various concepts, efforts and implications regarding the
Failure of startups in India.

During this project report helped us to enhance our knowledge regarding the work in to the
attitude of factors influencing towards failure of startups in India. Through this report we came to
know about startups in India.

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 LIST OF TABLES:-

TABLE NO. TABLE HEADING

2.1 Startup failure rate in India
2.2 New startup failure statistics
5.1 Age group of respondents
5.2 Gender of respondents
5.3 Number of employees
5.4 Startups operating sector
5.5 Absence of successful startup person as a mentor or role model
5.6 Failed venture possession of a startup plan
5.7 Frequency of using a startup plan
5.8 Insufficient knowledge in the domain of business
5.9 Lack of leadership skills caused startups to fail
5.10 Loss of management control due to work overload
5.11 Ineffective management communication with employees
5.12 Lack of good communication with external stakeholders
5.13 Insufficient managerial experience
5.14 Absence of a professional advisor
5.15 Low and high price strategy as a contribution to startup failure
5.16 Uncontrolled expenditure as a cause of startup failure
5.17 Avoiding payment of lenders’ interest as a cause of failure
5.18 Delay in the conversion of goods to cash
5.19 Non-payment of taxes
5.20 The lack of marketing planning as a cause of failure
5.21 Lack of financial plan as a cause of failure
5.22 Lack of financial accounting skills
5.23 Failure to record startup transactions
5.24 Insufficient control of startup resources as a cause of failure
5.25 Customers’ failure to pay debts

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5.26 Lack of capital at start-up stage
5.27 Using a unique back account each for startup and personal use
5.28 Delays in collecting from credit customers
5.29 Lack of demand for products/services
5.30 Intense competition in the market
5.31 Lack of differentiation of product/services from competitors
5.32 Neglecting to attend customers’ complaints
5.33 Failure to cultivate products awareness as a factor of failure
5.34 Theft of business assets as a cause of startup failure
5.35 Bribery and corruption as a cause of startup failure
5.36 Lack of startup management training and development
5.37 Inadequate financial support as cause of failure
5.38 Stringent procedures in licensing a startup
5.39 Scarcity of skilled people
5.40 Unavailability of raw material
5.41 Lack of access to water and electricity
5.42 Inadequate infrastructure condition where the startup was located

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 EXECUTIVE SUMMARY

This executive summary presents findings from a comprehensive study on the factors influencing
the failure of startups in India. The report delves into various aspects affecting the success and
failure rates of startups in the Indian ecosystem, aiming to provide insights for entrepreneurs,
policymakers, investors, and other stakeholders. The study employed a mixed-methods approach,
combining qualitative interviews, quantitative analysis, and literature review to capture a holistic
understanding of the challenges faced by startups in India.

The Indian startup ecosystem has witnessed remarkable growth in recent years, yet the
prevalence of startup failures remains a significant concern. This project endeavors to investigate
the factors influencing startup failures in India, aiming to provide valuable insights for
entrepreneurs, investors, policymakers, and researchers. Through a comprehensive analysis of
both external and internal factors, this study seeks to shed light on the complexities of the startup
landscape and offer recommendations for fostering a more conducive environment for
entrepreneurial success.

The necessary skills and knowledge on how to open and manage a startups can be mastered but
the uncertainties during decision-making, as well as the risks, obstacles and barriers present in
the startup environment can change established ways of conducting a startup. However,
identifying the causes of such uncertainties, risks and obstacles is essential as it may reduce the
probability of failure in the future, and supports effective policy-making.

The purpose of this report was to examine the factors contributing to the failure of startups in
India, with three specific objectives: To Identify Key Factors Leading to Startup Failures, To
Analyze the Impact of Economic, Social, and Regulatory Factors, To Propose Recommendations
for Mitigating Startup Failures. Recommendations made to government could mitigate the high
number of startups failures.
This research was conducted under a positivism theoretical perspective and a quantitative
research method was adopted. A questionnaire was the primary data collection instrument and
the snowball sampling technique was employed. Results were statistically descriptive in nature
and presented in tables, pie charts, and bar charts. The results indicated that critical factors which
influenced the failure of startups in India were: startup owners and managers lacked knowledge

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of startup systems; startup owners and managers lacked financial accounting skills; and
negligence by startups owners and managers in planning and controlling business resources. This
indicates that institutions do not actively promote startup knowledge and skills development and
there is an absence of successful startups role models and mentors or coaches for startups
capacity-building. Among others factors influencing startup failure in India, this study identified
a lack of economic support and availability of fundamental startup resources such as raw
material, skilled people and finance, rigid policy-making regulations, and a high level of
corruption and theft in the country, to the extent that the startup may lack money and is unable to
continue operations.
The study recommends that since most startups operate on a basis of sole decision-making, it is
important that the entrepreneur/manager should make a concerted effort to acquire the necessary
knowledge and skills in management and finance systems, primarily to start a startup or as
needed, so that risk and probability of failure can be reduced. Policy-making should consider
support structures for entrepreneurial capacity- building, increase the production of primary
products and raw material, provide entrepreneurial training and skills development (higher
education), and develop mechanisms to allow easy access to information, reduce trading
restrictions.

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 CHAPTER 1 :- INTRODUCTION TO TOPIC

In recent years, the Indian startup ecosystem has taken off and has matured. Driven by factors
such as availability of funding, consolidation activities by a number of firms, evolving
technology space and a burgeoning demand within the domestic market has led to the emergence
of startups. The numbers on startups speak volumes about the emergence of startups — it is
projected that by 2024 there will be 71000 firms from 11500 startups in 2020.

1.1 WHAT IS A STARTUP ?

A startup is a young, dynamic company which could be an entrepreneurial venture or a new

business, a partnership or temporary business organization designed to search for a repeatable
and scalable business model.

A startup is a company built on technology and innovation wherein the founders attempt to
capitalize on developing a product or service for which they believe there is a demand.

According to an Infosys Co-founder, a startup is defined as a business:

• Within the first three years of its existence
• Employing 50 people or less
• Revenue of INR 5 cr. or less
A startup is a company or organization in its early stages, typically characterized by high
uncertainty and risk. A startup's success depends on its ability to solve a problem that people care
about, and to do so better than any existing solution.

Startups are often technology-based, but not always. They can be based on a new business
model, a new way of marketing, or a new product or service. The key characteristic of a startup
is that it is trying to do something new, not just improve on existing solutions.

The most successful startups are those that can identify a problem that people care about and
then develop a unique solution that is better than any existing solution. The best way to find such
problems is to look for areas where there is a lot of existing user frustration.

Once a startup has found a problem that people care about, the next step is to develop a solution
that is better than any existing solution. To do this, startups need to have a deep understanding of

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the problem they are trying to solve. They need to understand the needs of their target users and
what they are currently doing to try to solve the problem. Only by having this deep
understanding can a startup develop a truly innovative solution.

The most successful startups are those that can not only identify a problem and develop a better
solution, but also execute on their vision. To do this, they need to have a strong team with the
right skills and experience. They also need to be able to raise capital to fund their operations and
scale their business.

If you're thinking about starting a company, it's important to make sure you have the right skills
and experience on your team. It's also important to have a clear understanding of the problem
you're trying to solve and the potential market for your solution. And finally, you need to be able
to execute on your vision and raise the capital necessary to grow your business.

1.1.1 Overview of Startup Ecosystem :

A startup ecosystem is a network of people, investors, institutions, and companies that work
together to create an environment for startups to thrive. Startup ecosystems can be physical
places, like Denver, or online spaces, like the Trends community.
It is formed by people, startups in their various stages and various types of organizations in a
location (physical or virtual), interacting as a system to create and scale new startup companies.
These organizations can be further divided into categories such as universities, funding
organizations, support organizations (like incubators, accelerators, co-working spaces etc.),
research organizations, service provider organizations (like legal, financial services etc.) and
large corporations. Local Governments and Government organizations such as Commerce /
Industry / Economic Development departments also play an important role in startup ecosystem.
Different organizations typically focus on specific parts of the ecosystem function and startups at
their specific development stage.
The startup ecosystem consists of multiple types of organizations and individuals that interact
With each other and influence the startup company. These organizations, such as universities,
funding organizations, big companies and others, play different roles depending on the
development stage of the startup. Important people are e.g. angel investors, advisors or other
entrepreneurs, who are all linked to each other through various events, locations and activities.
The dynamics of an ecosystem can change instantly through external factors like market

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disruptions or a shift in the financial climate. Since these factors are a result of the startup's
location and environment, entrepreneurs have little control over them.
Internal factors are interdependent with its ecosystem, e.g. social attributes which determine
worker talent and social networks, or material attributes such as certain government policies
and physical infrastructure. The startup founders have, contrary to the external factors, a high
extent of control over internal factors.

1.1.2 Innovation :
When an idea or invention is transformed into a good or service, which creates a new value
for customers, it can be called innovation. The idea has to be replicable and satisfy a customer
need. Businesses that implement innovations or produce revolutionary products take a greater
risk than their competitors because they create new markets. Imitators stand in contrast to
innovators and take small risk (BusinessDictionary.com).
Billionaire entrepreneur Vinod Khosla believes the acceptance of risk and failure are
inevitable for innovation. Because big companies try to avoid both, great innovations like the
internet or Google came from outsiders, he argues (The Economist 2007).
There is a critical difference between an innovation and an invention. An invention for itself
is not necessarily marketable or useful, whereas an innovation combines the invention with a
customer need. For instance, the invention of a solar panel doesn't bring any value in itself,
although by applying it on the roof of a house it fulfills a market need.
The term `innovation' is mostly used referring to new technology. However, innovations do
not necessarily need to involve technology at all. McDonald's fast self-service concept led to
a revolution in the fast-food industry just by running a restaurant in an entirely different way. A
lot of innovation happens rather in services and processes than in technology (The Economist
2007). A third kind of innovation can be illustrated by the example of Levi's and how the
company changed the public's perception towards wearing jeans. Originally being used as pants
only for workers due to its extraordinary durability, through innovative product positioning in the
market, the jeans evolved into a fashionable item for the masses.

1.1.3 Characteristics of Startups :

1) A startup is focused on growth –

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A startup is an institution that is founded with the aim of going big i.e. to scale the business into
brand. So, the startup founder and the team only aim for one thing i.e. growth. Small businesses
may be happy staying small but start up whether it is small in size or big, they aim to scale up.
This is the difference between a small business and the startup. A startup has the goal of growing
and scaling and doesn’t want to remain a startup in the future. The sole aim of a startup remains to
grow whether by increasing the capital of the company or by using or lending different
technologies.
2) A startup is a solution for problem –
When someone asks what a startup is, you have to be able to explain it in simple terms so that
they can understand clearly. It experiences a problem and then tries to solve it with ingenuity. A
successful start up typically wants to solve a problem and make the world a better place.” Hence
if a company helps in solving a problem and brings some changes, it is a startup company
otherwise your company is just an idea.
3) A startup is flexible –
When it comes to startup, the most important term is flexibility. A startup should be flexible
because they are experimenting to validate business models. In the beginning stage of startup,
everything is not perfect so there is a need of fixing in different parts of startup. Hence, a startup
company is flexible and is prone to fixing.
4) A startup is working something innovative together –
With a certain goal and thoughts, a startup is founded. In this competitive world, you should have
some unique characteristics that can make you stand out from others and for startup i.e.
innovation. When a team of different individuals come together to work towards a goal which will
be something new and innovative, that can be considered as a startup. A startup is a place where
different innovative ideas come together and they work on it to produce innovative products.
5) A startup is a company with a few employees :
When a company is founded, there needs to be a team to scale business. The team may include
employees, freelancers and so on. There is no any benchmark that your employee count should
not exceed a certain number. Generally, the startup has fewer employees working together. A
startup is a company where fewer number of people work together to develop an unique product
or service and bring it to the market.
6) A startup is about making change :

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A startup is all about working on something new, creative. Some define startup as “A startup is
the conscious decision to form a group of people with the sole purpose of bringing about change
in the real world.” The changes in this definition can be considered as doing something new that
can boost not only the people involved in this but also the world.
7) A startup is a culture of innovation and creativity :
A successful startup has a culture of innovation and creativity. It's always looking for new ways
to do things and new ways to improve its product or service. It's open to new ideas and willing
to experiment.
8) A startup has a strong work ethics :
A successful startup has a strong work ethic. Its team members are passionate about their work
and are always looking for ways to improve their skills and knowledge. They're never satisfied
with mediocrity or with doing just enough to get by. They're always striving to be the best they
can be.
9) A startup is willingness to take risk :
A successful startup is willing to take risks. It's not afraid to try new things or to fail. It knows
that failure is a part of the process and that sometimes you have to take risks in order to succeed.
The importance of comparing Indian start-ups to other countries
There are numerous reasons why comparing Indian start-ups to those of other nations is
important. First, it’s helpful to understand the Indian start-up ecosystem’s strengths and
weaknesses and how it can be improved. Besides, it gives experiences into the worldwide market
and helps Indian new companies to globally contend. Thirdly, it’s helpful to compare Indian
start-ups’ performance to that of global competitors and pinpoint areas for growth. Lastly,
comparing Indian start-ups to those of other nations may assist in attracting additional foreign
talent and investment into the Indian start-up ecosystem. In general, it is essential for the
expansion and development of the Indian start-up ecosystem to compare Indian startups to those
of other nations.

1.2 BACKGROUND
1.2.1 Evolution of the startup ecosystem in India :
The evolution of startups in India has been a dynamic journey marked by significant shifts in
economic policies, technological advancements, and changing societal attitudes.

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India has a rich history of entrepreneurship deeply rooted in its economic and cultural fabric. The
entrepreneurial spirit in India dates back centuries with a legacy of traders, merchant, and
craftsmen contributing significantly to the country’s economic landscape. Historical trade routes,
such as the Silk Road, were conduits for commerce, fostering an environment of business and
entrepreneurship.
Regardless of Innovation and Entrepreneur being older terminology and yet still being often
mixed or misunderstood with terms like inventions and small business owners. When we hear
the word start-up our mind immediately thinks of a small business with some innovative ideas.
The term “start-up” meant upstart back in 1550. Later the word “start-up” was linked with the
rise of Silicon Valley in the 1970s. Some tech companies concentrated around Stanford
University which had a huge impact on the technological development in the world. The term
Silicon Valley was referred to those companies because they were manufacturing
semiconductors for which the main ingredient was silicon.
In 1976, Fobes Magazine first used the word “Start-up”. Fobes in its article writes as follows
“The … unfashionable business of investing in start-ups in the electronic data processing field”.
Next, in 1977, the Business week article includes the line “An incubator for start-up companies,
especially in the fast-growth, high-technology fields.”

However, start-up became a popular term in the 1990s and early 2000’s when the dot com boom
took over. Businesses like Microsoft or Apple were scaling up at a faster pace than ever seen
before. Technology and the internet grew to unparalleled heights. It grew such that the dot com
bubble bursted, causing one of the biggest crashes in the global economy in recent decades.
Since the 2000s, Startups like Google, Facebook, Uber, Airbnb, Twitter, LinkedIn, Tesla and
Dropbox, accelerated their speed. None of them existed 20 years ago, these companies cannot be
considered startups in their current state as they are now large companies. All these companies
have grown into billion-dollar valuations in just a few years.

1.2.2 Significance of startups for economic growth:

Startups play a significant role in driving economic growth! They bring innovation, create
jobs, and contribute to the overall development of an economy. Here's why startups are so
important:

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1. Innovation: Startups are often at the forefront of innovation, introducing new products,
services, and technologies. They challenge traditional industries and drive competition,
pushing existing companies to innovate and improve. This fosters a culture of continuous
improvement and helps the economy stay dynamic and relevant.
2. Job Creation: Startups are major job creators, especially for young and talented individuals.
As they grow, they require a skilled workforce, leading to job opportunities and reducing
unemployment rates. Startups also tend to offer a more flexible and entrepreneurial work
environment, attracting top talent and fostering creativity.
3. Economic Resilience: Startups contribute to economic resilience by diversifying the
economy. They bring new ideas and industries, reducing reliance on a few dominant sectors.
This diversification helps to mitigate risks and make the economy more robust in the face of
economic downturns or disruptions.
4. Increased Productivity: Startups often embrace new technologies and innovative
approaches, leading to increased productivity. They focus on efficiency and effectiveness,
driving productivity gains across industries. This improved productivity benefits the overall
economy by increasing output and competitiveness.
5. Wealth Creation: Successful startups can generate significant wealth, not only for their
founders and investors but also for the wider community. This wealth can be reinvested in
new ventures, creating a positive cycle of entrepreneurship and economic growth.
6. Global Competitiveness: Startups can enhance a country's global competitiveness by
positioning it as a hub for innovation and entrepreneurship. They attract foreign investment,
foster collaboration with international companies, and contribute to the country's reputation
as a center of excellence.
7. Economic Prosperity: Startups boost economic activity that helps the nation to expand. In
addition to this, it also maximizes profits through technological innovations. This eventually
improves the GDP of an economy and transfers money into the hands of the customers. It
brings competitive dynamics to the economy to encourage existing businesses and adopt
newer technologies.
8. Developments and Innovations: Older businesses or industry leaders are more inclined to
spend money on incremental innovation and R&D on already established technologies.
While startups are more concerned with cutting-edge innovation and innovative technologies.

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 Startups are more agile and able to develop a concept into a product and update it in response
to customer demand with quicker decision-making communications as they are not
constrained by a multi-layered corporate bureaucracy. Employees are driven to go above and
beyond to succeed by the high risks involved. Giant corporations, like Google and Microsoft,
frequently buy out startups to better innovate and increase sales through their size and
distribution networks.
9. Increase the Production of Goods and Services: Startups tend to have more advanced
technology. The output of products and services increases as a result. With this, they are able
to produce greater revenue from the same amount of capital inputs as more established
businesses. In short, the new ventures enhance the production of goods and services which
increase the revenues of the nation also.
10. Direct Impact: Startups also directly affect the cities they are based in, just like Google and
Microsoft have impacted Mountain View and Redmond, respectively. They bring riches and
a sizable influx of graduates and seasoned professionals looking for employment chances
from other places.
11. Better Standard Of Living: The level of living for people in society is raised through start-
ups. New ideas and technologies introduced by start-ups contribute to raising the level of
living in the community. For instance, a business that makes healthy products contributes to
raising the standard of living of its customers by providing solutions for their health. When
they employ people, they also provide a higher standard of living. They contribute to their
improvement because they now have jobs and can support themselves. To develop quickly,
generate more jobs, and ultimately raise the standard of life of people via their innovations
and creativity, successful start-ups must have ambition and potential.
12. Creates Competitive Dynamics: Startups make society very dynamic and give economic
dynamism and competitiveness, which keeps the economy strong, active, and attentive. They
employ their inventions to produce innovative products that are dynamic and diverse and
boost the economy.
1.2.3 Unicorn Landscape of startup :
India has emerged as the 3 rd largest ecosystem for startups globally with over 1,12,718 DPIIT
( Department for Promotion of Industry and Internal Trade ) - recognized startups across

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763 districts of the country as of 3 rd October 2023. India ranks 2nd in innovation quality with top
positions in the quality of scientific publications and the quality of its universities among middle
– income economics. The innovation in India is not just limited to certain sectors. We have
recognized startups solving problems in 56 diverse industrial sectors with 13% from IT services,
9% healthcare and life sciences, 7% education, 5% agriculture and 5% food and beverages.
Indian Startup Ecosystem has seen exponential growth in past few years (2015-2022):
 15X increase in the total funding of startups
 9X increase in the number of investors
 7X increase in the number of incubators
The Indian unicorns are flourishing in the fast – paced and dynamic economy of today. These
startups are not only developing innovative solution and technologies but are generating large –
scale employment. Till FY 2016-17, approximately one unicorn was being added every year.
Over the past four years (since FY 2017-18), this number has been increasing exponentially, with
a whopping 66% Year-on –Year growth in the number of additional unicorns being added every
year. As of 3rd October 2023, India is home to 111 unicorns with a total valuation of $ 349.67.
Out of the total number of unicorns, 45 unicorns with a total valuation of $ 102.30 were born in
2021 and 22 unicorns with a total valuation of $29.20 were born in 2022-2023 saw the
emergence of Zepto as the latest only unicorn in the year.

1.3 Problem Statement:

1.3.1 Rise in Startup Failures :
Startups are particularly susceptible to failure because they are often in their early stages and
lack the resources and experience to manage operations effectively.
When it comes to examining the increasing trend of startup failures, there are several factors to
consider. One of the key aspects is analyzing the market conditions that startups operate in.
Fluctuations in demand, intense competition, and rapidly changing consumer preferences can
significantly impact a startup's success.
Another crucial factor is the availability of funding. Many startups face challenges in securing
adequate funding to fuel their growth and sustain operations. Without sufficient financial
resources, it becomes challenging to scale and overcome obstacles.

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Inadequate planning and poor execution are also common contributors to startup failures. Setting
unrealistic goals, ineffective strategies, and a lack of adaptability can hinder a startup's progress
and ultimately lead to failure. Additionally, legal challenges such as compliance issues,
intellectual property disputes, and contractual conflicts can pose significant hurdles for startups.
By examining these factors in detail, we can gain a deeper understanding of the challenges
startups face and work towards developing strategies and support systems to address them. It's all
about learning from these failures and creating an environment that fosters innovation and
success.
1.3.2 Difference between a Successful Startup and Failed Startup :
When it comes to starting a business, there are many factors that can determine whether a startup
is successful or not. Some may think that success is simply luck or timing, but in reality, there
are many different elements that contribute to the success or failure of a startup.
The biggest difference between a successful startup and a failed one is the quality of the product
or service they offer. Successful startups understand their target audience and provide a product
or service that meets their needs. They also create products that can stand the test of time and are
easily updated to keep up with changing trends and customer demands.
Another key difference between a successful startup and a failed one is the team behind the
company. The team should consist of people who have a clear understanding of their roles, are
passionate about what they do and can bring something unique to the table. A successful startup
will also have a well-defined marketing strategy that includes both online and offline elements.
A good marketing strategy will help you reach your target audience and drive sales.
One of the most important differences between a successful startup and one that fails is their
attitude towards risk. Successful startups are willing to take calculated risks in order to achieve
success, while failed startups often shy away from taking any risks at all. Taking risks can be
difficult, but it is necessary in order to stay competitive in today’s market.
Finally, one of the main differences between a successful startup and a failed one is their ability
to adapt to change. The market is constantly evolving and companies need to be able to quickly
adjust their strategies in order to remain competitive. A successful startup will be able to
quickly pivot and adjust their plans based on changing customer needs while a failed startup may
be reluctant to make changes and unable to keep up with the times.

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Starting a business can be daunting, but understanding the differences between a successful
startup and a failed one can help you make better decisions when starting your own
company. quality products, an expert team, calculated risks and an ability to adapt are all
key factors in determining whether your startup will be successful or not.

1.3.3 Implications for investors, entrepreneurs and the economy :

Implications for investors – Investors, the lifeblood of startup funding, are impacted by failures
in their portfolio. Analyzing the reasons behind startup failures provides invaluable insights for
refining investment strategies, risk management, and portfolio diversification.
Implications for Entrepreneurs – For aspiring and existing entrepreneurs, a profound
understanding of why startups fail is crucial. It offers a proactive approach to risk mitigation,
strategic planning, and navigating the challenges inherent in the entrepreneurial journey.
Implications for the economy – The health of the startup ecosystem I intricately linked to broader
economic growth. A comprehensive analysis of startup failures contributes to policymaking,
fostering an environment conducive to innovation, sustainability, and economic resilience.

1.4 Objectives of the Study :

This study aims to outline the factors contributing to the rising trend of startup failures. The
scope encompasses a comprehensive exploration, delving into economic uncertainties, social and
cultural influences, regulatory complexities, and technological shifts. By establishing a clear
scope, the study seeks to provide a fine understanding of the challenges faced by startups. By
defining the scope, we aim to establish a comprehensive framework that encompasses various
dimensions, including economic, social, regulatory and technological aspects, thereby providing
a holistic understanding of the challenges faced by startups.
Some of the specific objectives of the study are :
1.4.1 To Identify Key Factors Leading to Startup Failures
The primary objective is to identify and analyze the factors that significantly contribute to the
failure of startups in India. This involves a comprehensive examination of the various elements
encompassing economic, social, regulatory, and technological aspects.
1.4.2 To Analyze the Impact of Economic, Social, and Regulatory Factors

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The study aims to assess how economic conditions, societal influences, and regulatory
frameworks shape the trajectory of startups. By analyzing these factors, we can gain insights into
the challenges and opportunities presented to emerging businesses.
1.4.3 To Propose Recommendations for Mitigating Startup Failures
Based on the findings, the study endeavors to propose actionable recommendations for startups,
policymakers, and other stakeholders. These recommendations are geared towards fostering a
more conductive environment for sustainable startup growth.

1.5 Scope and Limitations :

The scope of this study encompasses startups across various industries operating in India. While
the focus is on the startup ecosystem, lessons drawn from experiences may be considered.
However, it is essential to recognize the limitations inherent in such a study, including potential
biases in data collection, the rapidly evolving nature of the startup landscape, and the dynamic
regulatory environment.
This study focuses primarily on startups within the geographical boundaries of India. The
research will encompasses a diverse range of industries, allowing for a comprehensive analysis
of cross – sectoral challenges.
Limitations :
While every effort will be made to provide a holistic understanding of startup failures, certain
limitations are recognized. These include constraints on the scope of the research, potential
biases in data collection, and the dynamic nature of the startup ecosystem, which may evolve
after the study's conclusion.
In the subsequent chapters, the study will unfold, exploring the existing literature, detailing the
research methodology, analyzing the factors influencing startup failures, presenting case studies,
and ultimately offering valuable recommendations for a more resilient startup landscape in India.

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 CHAPTER 2 : LITERATURE REVIEW
This chapter includes the summary of the literature regarding the area of the research. In this
chapter we will study about the startup failure rate, reasons for startup failure and many more.
2.1 Startup failure rate :-
The startups, from its nature of quick scalability, have the high level of collapse risk. The failure
rate of startups is measured by different methods and in different markets. According to a study
conducted by IBM Institutes for Business Value and Oxford Economics in 2021, around 90% of
Indian startups fail within the first five year.

Table 2.1 _ Startup Failure rate in India

10%
Success-10%

Failure-90%

90%

This high failure rate is attributed to various factors ranging from the lack of market demand,
insufficient funding from lack of market demand, insufficient funding, and poor business
planning to inadequate mentoring and stiff competition. However, these statistics do not take into
account the distinction between a startup and other business, which are not so focused on the fast
growth. Due to this fact, we can assume that also their failure rate is lower because they do not
risk so much and are more stable. Therefore, in the India the level of failure of startups in 5-year
perspective is much higher than 50%. This rate is confirmed by another researcher that 90% of
the startups are fail within first five years. Approximately 10% of startups fail within the first
year. According to the United States Bureau of Labor Statistics, the startup failure rate increases
over time, and the most significant percentage of businesses that fail are younger than 10 years.

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Over the long run, 90% of startups fail. In other words, only one in 10 traditional businesses in
the startup category ultimately survives. Business failure rates have remained more or less
consistent since the 1990s across most industries. 20% of projects fail at the end of the first
year, 30% fail by the end of the second year, 50% fail by the end of the fifth year, and 70% fail
by the end of the tenth year. In India 9 out of 10 new businesses failed. Venture-backed firms
fail 7 out of 10 times. Only 1% of startups go on to become household names like Uber, Airbnb,
Slack, Stripe, and Docker. For first-time entrepreneurs, the success rate is 18%. The government
said, that India’s startup success rate was far higher than that of other nations’ businesses and
that the nation would have 84,012 firms by the end of November 2022, up from 452 in 2016.

Table 2.2S - New Startup Failure Statistics

Years Percentage
First Year (%) 20%
Second Year (%) 30%
Fifth Year (%) 50%
Tenth Year (%) 70%

80

70

60

50

40
New Startup Failure Rate
30

20

10

0
First Year(%) Second Year(%) Fifth Year(%) Tenth Year(%)

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2.2 Reasons for Startup Failure:
Startups begin as small businesses, with meager funding and a limited scale of operations. Their
customer base is also restricted to the locality they are situated in. However, a slow start does
not, usually, dampen the huge aspirations of such businesses. Their desire to grow and expand is
aptly reflected in their innovative ideas and enthusiastic entrepreneurial drive. However, despite
consistent efforts by entrepreneurs, data suggests that only one in a thousand startups in India
manage to succeed and make it big. The rest either fail to continue with their operations or
remain incapable of breaking the glass ceiling. The probable causes for such low success rates
are manifold, the common ones among which are mentioned below.

1. Choosing the inappropriate legal status for your business

Choosing the right legal status (Business Type) for your business is critical at the stage of its
inception itself. An Indian business has the option to register and operate as a proprietorship, a
partnership firm, an LLP, or a company, whereas a business with foreign direct investment is
allowed only in a Company or the LLP subject to the regulatory framework under FEMA and
applicable FDI policy in force in India.

A company may be owned by an individual (OPC) or by a group of individuals (limited

company), both of which are mandatorily required to get registered under the Companies Act
2013. Registration is also mandatory for an LLP under the LLP Act, 2008. However, a
proprietorship firm need not get registered under any law, while registration is optional for a
partnership firm under the Partnership Act, 1932.

For determining the appropriate legal status for your business, you must consider its scale of
operations, area of operations, funding and investment, and future prospects of growth and
expansion. If you are looking forward to making it big in the industry, the cost of business
incorporation and compliance must not distract you from choosing a status that best suits your
business aspirations. Need Assistance? You can consult our advisors and let them understand
your business needs. They’ll suggest you the available options and help analyze their pros and
cons to make a wise and informed choice!
Small-scale businesses, with a limited prospect of growth and expansion, and a negligible
amount of funding, often chose proprietorship, partnership firm, or OPC as their legal statuses

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 because the number of compliances to be fulfilled is fewer than companies and LLPs. However,
the demerit of registering as a proprietorship, partnership firm, or OPC is that the owner is
burdened with an unlimited liability toward the business and is considered inseparable from it.

Contrarily, a company or an LLP is operated by multiple owners with liabilities limited to the
percentage of capital contributed by them. The owner and the business here operate as separate
entities. Moreover, there are no restrictions on the issue and the transfer of shares in the case of a
company/LLP. Hence, even if your business has started small but has the potential of receiving
huge investments in the near future for growth and expansion, a limited liability company is best
suited to its legal status.

2. Non-drafting of a proper business plan and policy

Before launching your business, you must draft a detailed business policy containing the terms
and conditions, privacy policy, disclaimer, return, refund, and cancellation policies. This will
prevent you from landing into any trouble in case of disputes with customers, vendors and
employees. The shareholder’s agreement or founder agreement should form part of the business
policy as this sets the responsibilities of each of the founders and comes as a very useful
document in case a dispute arises among the founder shareholders. Incorporating the important
covenants of the shareholder’s agreement in the Articles of Association is considered a good
practice.

3. Lack of proper documentation

For all legal and practical purposes, a business must acquire and store the original copies of
necessary documents that they might often require as proof of their existence, identity, address,
legal and tax compliances, business agreements, business transactions, capital invested, and
Intellectual Property. The necessity of acquiring and storing documents properly also extends to
the shareholders and directors of the business. Some of the important documents are listed
below:

 PAN, TAN, GSTN, and other tax registration certificates for tax compliances
 Certificate of Registration,
 Rental/property documents as proof of the existence of the business

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 MoA, AoA in case of Company
 LLP Agreement in case of LLP and partnership deed in case of Firm
 Share Certificates as proof of capital investments into the business
 Trademark registration certificate
 DIN as proof of identity of directors
 DSC as proof of identity of subscribers and directors
 Documents related to the business bank account
 Minutes of the annual general meeting and other special meetings of the company

4. Not protecting your IPR

Intellectual property rights (IPR) are the most valuable asset of a business. However, most
start-ups often tend to be careless and neglect towards claiming their intellectual property rights
like names, brands, labels, patents, or trademarks under the Trademark Act. A common reason
for this is misinformation among the owners about the consequences of non-compliance.

IP registrations help protect your business from the theft and misuse of your original and unique
creations and enable you to challenge any violation by any entity in a court of law. Therefore,
under any circumstances, you must claim your IP entitlements, and seek professional guidance if
needed.
5. Not tracking the expenses of the business

Start-ups often find themselves in a pickle when it comes to maintaining their account books.
Recording the incomes and expenses of your business is necessary for tax compliances and may
land you in a pool of hefty penalties if you fail to meet the necessary requirements under relevant
tax laws. Moreover, a lack of accurate records of incomes and expenses may increase your
challenges in preparing the annual and long-term budget for your business. Hence, it is advisable
to maintain proper records on incomes and expenses, and seek professional guidance or service if
necessary. Nowadays the option of cloud-based accounting and payroll services is very popular.
We help you set up a robust accounting and payroll system and train the administration or the
accounts staff on a need basis.

6. Not differentiating between capital and revenue expenses

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Maintaining separate accounts for revenue and capital expenses is recommendable for businesses
from the points of view of finance and accounting. Revenue expenses record the day-to-day
operational expenses of the business, whereas the capital expenses are spent as long-term
investments into the business. For proper short-term and long-term budgetary planning of the
business, the owners must be aware of the overall expenses, including their nature and purpose.

Besides, businesses also receive different kinds of deductions on different categories of expenses
from the IT department. Such deductions are capable of increasing the disposable income of the
business, which can further be invested in its growth and expansion. If applicable, revenue
expenses can receive tax deductions on the entire amount spent in a financial year. However,
capital expenses made in a financial year shall be adjusted for depreciation and shall receive tax
deductions for several years to come.

7. Not differentiating between personal and business expenses

It is never advisable for founders to spend their personal incomes on operating their businesses.
They must either borrow or sell the equities of the business in return for investments that can be
further spent on operational and capital expenses of the business. Mixing the two together is not
a wise business decision, as it is bound to increase the burden on the pockets of the founder-
owner and enhance the risks of losing money. Additionally, tax deductions on expenses can only
be availed if the transactions are in the name of the business and not its owner.

8. Missing the filing of tax returns

If you have maintained accurate records of the income, expense, profit, and loss of your
business, you must now shift your emphasis toward filing income tax and GST returns, in
accordance with the prescribed norms. Missing tax returns shall bring hefty penalties for your
business, which will probably be difficult to afford at such a nascent stage. If you are unable to
file tax returns yourself, you must immediately seek professional help or expert guidance in
order to avoid charges of non-compliance and evasion.

9. Non-compliance with labour laws

Businesses cannot commence their operations without hiring employees or labour. For this, the
owners need to apply for certain mandatory registrations with the Department of Labour.

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 These are

 Registration under the Shops and Establishment Act with the department of labour, having
jurisdiction, within 30 days of incorporation of the business.
 Registration under the Provident Fund Act can be applied either on the official website of the
EPFO or through the business incorporation application forms like SPICe+.
 Registration under the ESIC Act can be applied either on the official website of the ESI or
through the business incorporation application forms like SPICe+.

10. Not seeking professional help

Most startup owners are either unaware of the necessary compliances they must meet before
commencing their businesses, or avoid doing so due to the high professional cost involved. It is
obvious that they themselves do not possess the legal and technical knowledge and experience
for the same.

However, they often fail to realize that the penalties imposed for non-compliance are way more
costly compared to the amount charged by professionals for compliance services. Additionally,
legal proceedings can be initiated against your business, which might result in its closure. Hence,
to avoid such serious consequences for your business, we recommend that you hire professionals
and seek compliance services from them.

You can also avail of our services at SetIndiaBiz, where we specialize in providing company
registration and post-registration compliance services to all sorts and sizes of businesses, for the
past several years. Our services are backed by a team of professional legal experts, who also
provide guidance and suggestions to clients, wherever necessary. Our services are quick and
cost-effective with no compromises on their qualities. You can check out the necessary details of
our services on our website.

2.3 Factors Affecting Startup Success and Failure :

Factors affecting startup success:
1. Market Demand: Startups that address a pressing need or solve a problem in the market have
a higher chance of success. Understanding the target audience, conducting market research,

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 and identifying gaps or pain points can help startups align their offerings with market
demand.
2. Access to Funding: Adequate funding is crucial for startups to grow and scale. Factors such
as securing investments from venture capitalists, angel investors, or government grants can
significantly impact a startup's success. Access to capital allows startups to invest in product
development, marketing, talent acquisition, and infrastructure.
3. Strong Team: Building a talented and diverse team with complementary skills is essential. A
cohesive team with expertise in different areas like technology, marketing, operations, and
finance can help navigate challenges and drive innovation. A strong team also attracts
investors and fosters a positive work culture.
4. Market Competition: The level of competition in the market can influence a startup's success.
Startups need to analyze the competitive landscape, differentiate themselves, and develop a
unique value proposition. Continuous monitoring of competitors' strategies and adapting to
market dynamics is crucial for survival and growth.
5. Government Policies: Government policies and regulations can impact startups in various
ways. Favorable policies that support entrepreneurship, ease of doing business, tax
incentives, and intellectual property protection can create a conducive environment for
startups to thrive. On the other hand, excessive bureaucracy and unfavorable regulations can
pose challenges.
6. Technological Advancements: Embracing and leveraging technological advancements can
give startups a competitive edge. Staying updated with the latest trends, adopting innovative
technologies, and integrating digital solutions can enhance operational efficiency, customer
experience, and scalability.
These are just a few key factors Each startup journey is unique, and success depends on a
combination of factors, timing, and execution. It's crucial for startups to continuously assess and
adapt to changing market conditions while staying focused on their vision

The factors that can contribute to startup failure in India:

1. Lack of Market Demand: If there is no significant demand for the product or service a startup
offers, it can lead to failure. It's crucial for startups to thoroughly research their target market
and ensure there is a genuine need for their offerings.

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2. Insufficient Funding: Limited access to funding or inadequate capital can hinder a startup's
growth and sustainability. Without enough financial resources, startups may struggle to
invest in product development, marketing, and scaling operations.
3. Weak Business Model: A flawed or unsustainable business model can lead to failure.
Startups need to have a clear revenue generation strategy, a viable pricing model, and a plan
for long-term profitability.
4. Poor Execution: Even with a great idea, poor execution can be detrimental to a startup's
success. Inefficient operations, lack of effective leadership, and failure to adapt to market
changes can contribute to failure.
5. Intense Competition: In a highly competitive market, startups need to differentiate
themselves and offer unique value to stand out. Failure to effectively compete against
established players or disruptive competitors can lead to failure.
6. Regulatory Challenges: Complex regulations and bureaucratic hurdles can pose challenges
for startups, especially in sectors with strict compliance requirements. Navigating legal and
regulatory frameworks can be time-consuming and costly.
7. Lack of Talent: Building a skilled and motivated team is crucial for startup success.
Difficulty in attracting and retaining top talent can hinder growth and innovation.
8. Inadequate Market Research: Insufficient understanding of the target market, customer
preferences, and competitive landscape can lead to failure. Startups need to conduct thorough
market research to make informed decisions and develop effective strategies.
These are few factors that affect the failure of startup.

2.4 The Regulatory Environment for Startups :

The regulatory environment for startups in India has seen significant improvements in recent
years. The government has been taking proactive steps to promote entrepreneurship and
innovation. Let me break it down for you in a bit more detail.
First off, we have the Startup India Initiative, which was launched by the government to provide
a supportive ecosystem for startups. Under this initiative, startups can enjoy a range of benefits,
such as tax exemptions, easier access to funding, and simplified compliance procedures. It's like
a helping hand for startups to get off the ground smoothly.

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When it comes to incorporating a startup, the government has made things much simpler. They
introduced online registration portals, which means less paperwork and faster processing. This
makes it easier for entrepreneurs like you to kick start your ventures without unnecessary
hassles.
Now, let's talk about taxes. Startups in India can avail themselves of some awesome tax benefits.
For instance, eligible startups can enjoy a three-year tax holiday, which means they don't have to
pay any taxes during that period. Additionally, there are exemptions from capital gains tax on the
sale of specified assets. These tax benefits can help startups save a significant amount of money
and reinvest it back into their businesses.
Protecting intellectual property rights (IPR) is crucial for startups, and the government
recognizes that. They have taken steps to strengthen IPR protection for startups. For example,
they have introduced expedited patent examination, which means startups can get their patents
approved faster. They have also made it easier for startups to register their trademarks. This
helps protect your innovative ideas and creations from being copied or stolen.
When it comes to winding up a startup, the government has made it easier too. They introduced
the Insolvency and Bankruptcy Code, which provides a time-bound process for winding up
operations. This helps startups to exit smoothly and efficiently if needed.
Funding is always a critical aspect for startups, and the government has set up various funds and
schemes to provide financial support. For instance, there's the Fund of Funds for Startups (FFS),
which invests in venture capital funds that, in turn, invest in startups. There's also the Credit
Guarantee Fund Scheme, which provides collateral-free loans to startups. These initiatives aim to
address the funding challenges that startups often face.
In terms of regulatory reforms, the government has been working towards simplifying and
rationalizing regulations for startups. They have reduced compliance requirements and
introduced self-certification mechanisms. This means that startups can focus more on building
their businesses rather than getting caught up in excessive.

2.5 Government initiatives and their impact on startup:

The Indian Government had taken several steps to promote startups in India. The government of
India had launched several Schemes for Startups in India. Some of the schemes for startups in
India are :

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1) Startup India Initiatives :- Startup India scheme is an important government scheme that
was launched on 16th January 2016 with an aim to promote and support the start-ups in India
by providing bank finances. It was inaugurated by the former finance minister, Arun Jaitley.
Organized by the Department for promotion of industry and internal trade, the major
objective of Startup India is to discard some of the restrictive States Government policies
which include:

1. License Raj

2. Land Permissions

3. Foreign Investment Proposals

4. Environmental Clearances

The Startup India scheme is based majorly on three pillars which are mentioned below:

1. Providing funding support and incentives to the various start-ups of the country.

2. To provide Industry-Academia Partnership and Incubation.

3. Simplification and Handholding.

2) Startup India Seed Fund Scheme : The Startup India Seed Fund Scheme (SISFS) provides
financial assistance to early-stage startups for market entry, product trials,
commercialization, prototype development, and proof of concept. This is one of the best
scheme for funding for startups in India by government. The government has allocated a total
budget of 945 crores to this scheme. It expects to provide funds to 3600 startups. Grants of
up to 20 lakh rupees will be provided for developing trials or prototypes. This scheme also
aims to enhance the innovation culture and development in the country. Here’s the eligibility
criterion for this govt. scheme for startups.
1. The startup must be recognized by DPIIT.
2. The product or idea must be scalable, innovative, tech-based, and feasible.
3. Indian promoters must hold shares equal to or more than 51%.
4. The startup must apply within two years of its incorporation for this scheme.
The USP of this government scheme is that it’s industry agnostic and doesn’t require
physical incubation.

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3) Pradhan Mantri Mudhra Yojna : PMMY is a scheme for startups and MSMEs that aims
to provide access to capital and loans to help ventures sustain and grow their business.
Launched in 2015, eligible applicants can claim loans of up to 10 lakhs for working capital
requirements. The repayment period for loans availed under this scheme is five to seven
years. There are three categories under which loan gets provided in PMMY:
 Shishu – Up to 50,000
 Kishor -Up to 5 Lakhs
 Tarun – Between 5-10 Lakhs
Startups must be involved in trading, manufacturing, services, or any other non-farm
business to be eligible for this scheme.

4) Atul Innovation Mission : This scheme belongs to a category of government schemes for
startups with a mandate to promote entrepreneurship and innovation countrywide. The core
focus of this scheme is on tier-2 and tier-3 cities. Also known as AIM, this scheme provides a
platform for promoting world-class innovation hubs, sectoral focus, grand challenges, and
talent initiatives. Some key programs under this scheme are innovation centers, Atal
tinkering labs, community incubation centers, and innovation centers. Besides providing
financial support and resources to startups, the scheme offers easy access to information and
resources.
5) Digital India : Digital India GENESIS (Gen-next Support for Innovative Startups) is a deep-
tech startup platform initiative launched by the Ministry of Electronic and Information
Technology (MeitY). It was introduced in the year 2015 and aims to help tech startups from
mostly Tier II and Tier III cities scale up their operations. The selected ten thousand startups
will get their help for five years, and will be provided with the right tools to scale up. The
PM of India wanted to sustain the tech ecosystem, transform India, and empower society.
6) Make in India : ‘Make in India' is an initiative which was launched on 25th September,
2014, to facilitate investment, foster innovation, building best in class infrastructure, and
making India a hub for manufacturing, design, and innovation. The development of a robust
manufacturing sector continues to be a key priority of the Indian Government. It was one of
the first 'Vocal for Local' initiatives that exposed India's manufacturing domain to the world.
The sector has the potential to not only take economic growth to a higher trajectory but also

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 to provide employment to a large pool of our young labour force. Make in India initiative has
made significant achievements and presently focuses on 27 sectors under Make in India 2.0.
Department for Promotion of Industry and Internal Trade is coordinating action plans for
manufacturing sectors, while Department of Commerce is coordinating service sectors. The
Government of India is making continuous efforts under Investment Facilitation for
implementation of Make in India action plans to identify potential investors. Support is being
provided to Indian Missions abroad and State Governments for organizing events, summits,
road-shows and other promotional activities to attract investment in the country under the
Make in India banner. Investment Outreach activities are being carried out for enhancing
International co-operation for promoting FDI and improve Ease of Doing Business in the
country.
7) NIDHI Scheme : The NIDHI Scheme (National Initiative for Development and Harnessing
Innovations), introduced by the Department of Science & Technology (DST), Government of
India, is an umbrella program. It was developed to nurture and grow ideas, and knowledge-
and technology-based innovations into startups. The various NIDHI program include –
NIDHI-EIR, NIDHI- PRAYAS, NIDHI-SSS, NIDHI- CoE, NIDHI- GCC and NIDHI-
Accelerator. These programmers are implemented through Technology Business Incubators
(TBIs) around the country. The objective of this scheme is to promote student startups and
help young entrepreneurs accelerate their startup journeys by providing initial funding. They
will financially support the selected startups with Rs 10 Lakhs. It is important to note that the
NIDHI startup scheme aims to help out 20 student startups every year.
8) Startup Leadership Program : The Startup Leadership Program (SLP) is a renowned
global training program for innovators, leaders, and founders of today’s world who want to
become startup CEOs. It is a non-profit educational program that not only provides classes to
the next generation of leaders and entrepreneurs but also works as a professional network for
them. Initially founded in Boston in 2006 and launched in India in 2016, SLP in India is a
six-month-long program with 10 classes in total. They don’t have a specific age limit, hence,
anyone with a dream and interest in becoming a leader or entrepreneur can join it. This
startup initiative has educated over 3,900 people in over 14 countries and helped over 2000
startups.

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9) ASPIRE ( A Scheme for Promotion of Innovation, Rural , Industries and
Entrepreneurship ) : The ASPIRE Scheme was introduced by the Government of India in
2015 with the aim of improving rural India’s social and economic aspects of life, making it
one of the most popular schemes launched by the Indian Government. This scheme,
introduced by the Ministry of Micro, Small, & Medium Enterprises, aids in setting up a
network of technology centers and incubation centers to boost startup ventures in the agro-
industry, as a large part of India still depends on agriculture for their livelihood. One of the
main objectives of ASPIRE is to create new job opportunities to reduce unemployment and
strengthen the competitiveness of Startups and the MSME sector. All MSMEs with an
Entrepreneurs Memorandum Registration are eligible for this scheme.

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 CHAPTER 3 : RESEARCH METHODOLOGY
This chapter include the summary of research methodology regarding the area of the research. In
this chapter we will study about the introduction of research methodology,
3.1 Introduction:
According to Clifford Woody research comprises defining and redefining problems, formulating
hypothesis or suggested solutions; collecting, organizing and evaluating data; making deductions
and reaching conclusions; and at last carefully testing the conclusions to determine whether they
fit the formulating hypothesis.
3.1.1 Objective:
The purpose of research is to discover answers to questions through the application of scientific
procedures. The main aim of research is to find out the truth which is hidden and which has not
been discovered as yet. Some of the objectives are :
1) To gain familiarity with a phenomenon or to achieve new insights into it (studies with this
object in view are termed as exploratory or formulative research studies).
2) To portray accurately the characteristics of a particular individual, situation or a group
(studies with this object in view are known as descriptive research studies).
3) To determine the frequency with which something occurs or with which it is associated with
something else (studies with this object in view are known as diagnostic research studies).
4) To test a hypothesis of a causal relationship between variables (such studies are known as
hypothesis-testing research studies).

3.1.2 Criteria of a Good Research:

Although the research works and studies differ in their form and kind, they all still meet on the
common ground of scientific methods employed by them. Hence, scientific research is expected
to satisfy the following criteria:
1) The aim of the research should be clearly mentioned, along with the use of common
concepts.
2) The procedures used in the research should be adequately described, in order to permit
another researcher to repeat the research for further advancement, while maintaining the
continuity of what has already been done.

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3) The researchers procedural design should be carefully planned to obtain results that are as
objective as possible.
4) The flaws in the procedural design should be sincerely reported by researchers to correctly
estimate their effects upon the findings.
5) The data analysis should be adequate to reveal its significance.
6) The methods used during the analysis should be appropriate.
7) The reliability and validity of the concerned data should be checked carefully.
8) The conclusions are needed to be confined and limited to only those data which are justified
and adequately provided by research.
9) In case, the researcher is experienced and has a good reputations in the field of research,
greater confidence in the research is warranted.

3.1.3 Problem encountered by researchers in India:

Researchers in India, particularly those engaged in empirical research, are facing several
problems. Some of the important problems are as follows:
1) Lack of Scientific Training: The research methodology is not systematic. Many researchers
undertake research work without having current knowledge of the research methods. Even
the guides do not have a thorough knowledge of the various methodologies. Before
undertaking research projects, researchers should be well equipped with all the
methodological aspects.
2) Lack of communication with the supervisor: A university professor is a busy person. It is
important to have guidance on a research project. Poor communication gets on the way of the
progress of the research. It is important to communicate with the supervisor to clarify the
doubts regarding the research topic, to know what the supervisor expects from you and to
learn more about your research topic.
3) Time management: Spending ample time in learning the skills and practical implementation
consumes a lot of time. In such a scenario, taking out time for intense research and to draft a
top-notch research paper becomes impossible.
4) Not having a definite deadline: Deadlines are stressful. But not having a deadline can be
troublesome during the Ph.D. journey. Deadlines help you get closer to your goals. Many

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 times, Universities fail to implement a due date to submit the research paper, leading to
confusion and improper time management among the scholars.
5) A quantity of literature: It can be difficult to deal with the quantity of literature that one
might have accessed. The literature review is iterative. This involves managing the literature,
accessing data that supports the framework of the research, identifying keywords and
alternative keywords, as well as constantly looking for new sources.
6) Implementing quality of writing within the literature review: A literature review has to go
beyond being a series of references and citations. You need to interpret the literature and be
able to position it within the context of your study. This requires careful and measured
interpretation and writing in which you synthesize and bring together the materials that you
have read.
7) Insufficient data: Insufficiency of data is a potential problem. Most of the business
establishments are of the opinion that researchers may misuse the data provided by them.
This affects the purpose of research studies for which that particular data may be of utmost
importance.
8) Lack of confidence: Lack of confidence is one of the most common problems among
researchers. Researchers with low self-esteem feel less motivated thereby affecting the
quality of the work.
9) Concern that your focus is either still too broad or too narrow: This concern is inevitable. Be
prepared to adapt your research as you look through the literature. This might require you to
either increase its focus or narrow down so that the research is manageable. A broad focus
for research might be narrowed down by adding an appropriate context or by looking for
another variable within the research question or by focusing upon a theoretical viewpoint.
10) Library management: Library management and functioning is not satisfactory in many
Universities; A lot of time and energy is spent on tracing appropriate books, journals, reports
etc. Also, many of the libraries are not able to obtain copies of new reports and other
publications on time

3.2 Research Design :

The formidable problem that follows the task of defining the research problem is the preparation
of the design of the research project, popularly known as the “research design”. Decisions

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regarding what, where, when, how much, by what means concerning an inquiry or a research
study constitute a research design. “A research design is the arrangement of conditions for
collection and analysis of 1 data in a manner that aims to combine relevance to the research
purpose with economy in procedure.” In fact, the research design is the conceptual structure
within which research is conducted; it constitutes the blueprint for the collection, measurement
and analysis of data. As such the design includes an outline of what the researcher will do from
writing the hypothesis and its operational implications to the final analysis of data. More
explicitly, the design decisions happen to be in respect of:
(i) What is the study about?
(ii) Why is the study being made?
(iii) Where will the study be carried out?
(iv) What type of data is required?
(v) Where can the required data be found?
(vi) What periods of time will the study include?
(vii) What will be the sample design?
(viii) What techniques of data collection will be used?
(ix) How will the data be analyzed?
(x) In what style will the report be prepared?

3.2.1 Quantitative and Qualitative Methods:-

This study adopts a mixed-methods research design, combining both quantitative and qualitative
approaches to provide a comprehensive understanding of the factors influencing startup failure.
Quantitative Methods: A structured survey will be conducted among a representative sample
of startups to gather numerical data on various aspects, including financial performance, growth
metrics, and perceptions of government policies. Quantitative analysis allows for statistical
generalization and the identification of patterns across a broad spectrum of startups.
Qualitative Methods: In-depth interviews with startup founders, key stakeholders and
government officials will complement the quantitative findings. These qualitative insights aim to
capture nuanced perspectives, experiences, and narratives that quantitative data alone might not
fully elucidate. Themes emerging from qualitative data enrich the overall analysis.

3.2.2 Target Population

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The target population refers to the specific group or set of individuals or entities that the
researcher aims to study and draw conclusions about. Identifying the target population is crucial
as it defines the scope and focus of the research.

3.2.2.1 Sampling Strategy

The sampling strategy is designed to ensure diversity and representation within the startup
ecosystem. The sample will encompass startups from various industries, geographic locations,
and stages of development. A combination of purposive and random sampling methods will be
employed to select startups that align with the research objectives.

Purposive Sampling: Selection of startups based on specific criteria such as industry sector,
funding status, and geographical location. This ensures representation from different segments of
the startup ecosystem.

Random Sampling: A random selection of startups within the identified criteria to enhance the
generalizability of the findings. This method aims to minimize selection bias and provide a more
accurate reflection of the broader startup landscape.

3.2.3 Sampling Design

Sampling is the process of separating a significant portion of the population by taking into
account the limitation and characteristics that denotes them , in order to represent the population.
Sampling can be assumed to be the action of determining the sample that will participate in
answering the research questions.

Sampling design in research methodology refers to the plan or strategy used to select a subset of
individuals, items, or entities from a larger population for inclusion in a study. The goal of
sampling design is to ensure that the selected sample is representative of the population of
interest, allowing researchers to draw valid conclusions and make generalizations about the
population based on the sample data. There are various sampling techniques and considerations
involved in sampling design, including:

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1. Sampling Frame: Develop a sampling frame, which is a list or source that includes all the
elements from which the sample will be drawn. The sampling frame should accurately
represent the population and be accessible for sampling purposes.
2. Sampling Method: Select an appropriate sampling method based on the research objectives,
population characteristics, and available resources. Common sampling methods include:
Probability Sampling: Every member of the population has a known and non-zero chance of
being selected. Examples include simple random sampling, stratified sampling, systematic
sampling, and cluster sampling.
Non-probability Sampling: Members of the population do not have a known or equal chance
of being selected. Examples include convenience sampling, purposive sampling, snowball
sampling, and quota sampling.
3. Sample Size Determination: Determine the appropriate sample size needed to achieve the
desired level of precision and confidence in the study findings. Factors influencing sample
size include the level of variability in the population, the desired level of confidence, and the
margin of error.
4. Sampling Procedure: Outline the specific procedures for selecting the sample, including
how individuals or items will be chosen from the sampling frame and any criteria for
inclusion or exclusion.
5. Sampling Bias and Error: Identify potential sources of bias or error in the sampling process
and take steps to minimize or control for them. Common sources of bias include selection
bias, non-response bias, and measurement error.
6. Sampling Validity and Reliability: Evaluate the validity and reliability of the sampling
design in terms of its ability to produce unbiased and generalizable results that can be
replicated in similar populations or contexts.

3.3 Data Collection:

Data collection for studying factors influencing startup failures in India involves gathering
both quantitative and qualitative data from various sources. Here's an outline of the data
collection process:
1. Surveys:

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 Develop a structured survey questionnaire targeting startup founders, key team members,
investors, and other stakeholders.
 Include questions related to reasons for startup failure, economic factors, regulatory
challenges, market conditions, funding issues, etc.
 Distribute the survey online through email, social media, or startup networking platforms.
 Ensure anonymity and confidentiality to encourage honest responses.
2. Case Studies:
 Select a sample of failed startups for detailed case study analysis.
 Gather information about the startup's history, business model, market strategy, funding
sources, operational challenges, and eventual reasons for failure.
 Use a combination of primary and secondary sources, including company documents, news
articles, and industry reports.
 Analyze the case studies to identify patterns, commonalities, and unique factors contributing
to startup failures.
3. Secondary Data Sources:
 Collect secondary data from existing sources such as academic journals, industry reports,
government publications, and online databases.
 Review studies, articles, and reports relevant to startup failures, economic factors, regulatory
environment, and entrepreneurship in India.
 Extract relevant statistics, trends, and insights to complement primary data findings.
4. Document Analysis:
 Review relevant documents, such as business plans, financial statements, legal filings, and
government policies, to gather additional insights.
 Analyze documents for trends, patterns, and discrepancies that shed light on the factors
influencing startup failures.
5. Ethical Considerations:
 Obtain informed consent from participants before collecting data through surveys,
interviews, or observations.
 Ensure confidentiality and anonymity of respondents' identities and sensitive information.
 Adhere to ethical guidelines and standards for conducting research involving human subjects.

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3.4 Selection Criteria for Startups:

The selection criteria for startups participating in the study include:

1. Operational in India
2. Diverse industry representation
3. Varied funding statuses (bootstrapped, seed-funded, venture-funded)
4. Different stages of development (early-stage, growth-stage)

The combination of surveys, interviews, and case studies allows for a comprehensive exploration
of the research questions from multiple angles, enriching the overall analysis.

3.5 Data Analysis

3.5.1 Statistical Tools and Techniques

1. Descriptive Statistics: Utilizing descriptive statistics to summarize and present key features
of the quantitative data, including mean, median, and standard deviation.
2. Inferential Statistics: Employing inferential statistical techniques such as regression
analysis to examine relationships between variables and assess the significance of observed
patterns.

3.5.2 Qualitative Analysis Methods

1. Thematic Analysis: Identifying and analyzing recurrent themes in qualitative data to

uncover patterns and meanings. This approach aids in extracting insights from interviews and
case studies.
2. Content Analysis: Systematically analyzing textual data to identify specific patterns,
themes, and trends related to government policies and startup experiences.
The combination of quantitative and qualitative analysis methods ensures a robust and
holistic examination of the research questions, providing a nuanced understanding of the
factors influencing startup success and failure in the Indian context.

3.6 Failed startups in India:-

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Sustaining a startup is perhaps the most difficult phase for any entrepreneur. While everyone
advocates entrepreneurship as a shortcut to mint money and get rich scheme, the uncertainty and
constant pressure to perform is a huge responsibility even for the toughest of individuals. Some
of the unsuccessful startups in India are:-

1. Yumist - Serving home-cooked food is becoming a trend among today’s startups. Yumist
was one such venture. It was launched in 2014 to cover the daily-meals segment in India, a
largely untapped market. The founders were Alok Jain and Abhimanyu Maheshwari who
managed to raise nearly $3 million in funding.
Industry – Food delivery
Founded – 2014
Dissolved – 2017
Reason for failure - A business model with a high burn rate that required extensive capital
beyond Yumist's reach for achieving growth. Enough funding was also not available to run
the startup. So the startup had to shut down. The Yumist case study is often mentioned when
one talks about famously failed startups in India.
2. Dial-A-Celeb - Let’s be honest, a chance to talk with your favorite celebrity is on everyone’s
bucket list. Banking on this wish, Dial-A-Celeb was a short-lived yet exciting concept
founded in 2016 by Gaurav Chopra and Ranjan Agarwal. In addition to video chats with
actors and celebs, the platform also allowed customers to get autographed items such as toys
and diaries. However, the startup closed its doors within a year.
Industry – App
Founded – 2016
Dissolved – 2017
Reason for failure: The major reason for Dial-A-Celeb's failure was that celebrities were
coming up with their own apps to interact with fans. This trend resulted in immense
competition for Dial-A-Celeb and a direct impact on profitability. Dial-A-Celeb was shut in
2017. Know your rivals well and also brace yourself for competition that may arise in the
future.
3. Stayzilla - Once on the path to becoming the largest homestay network in India, Stayzilla is
reminiscent of a riches-to-rags story. With around $33.5 million in funding and establishing
itself in the hotel-rental segment, this brainchild of Yogendra Vasupal, Rupal Yogendra, and

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 Sachit Singhi started crumbling after it failed to repay vendors. The troubles were then
aggregated and in February 2017, Yogendra Vasupal officially announced the closure of
Stayzilla's operations.
Industry – Real estate
Founded – September 2006
Dissolved – 2017
Reason for failure: Stayzilla was way ahead of its time when launched. People were not
ready for such Hi-Fi technology. However, the company somehow managed some time on
the funding it received. But when people started becoming familiar with online booking, new
competitors emerged with better discounts and deals. Stayzilla was unable to provide the
same due to the unavailability of funds. Additionally, legal disputes and a lack of focus on
growing the business destroyed Stayzilla.
4. Roder – Inter-city travel has become a mainstream requirement— traveling 100 km or more
every day is deemed as just another day to some. The reason may be anything: office
location, excursion, meeting a friend, etc. These journeys can burn a hole in the pocket.
Roder (earlier known as Insta Cabs) was founded by Abhishek Negi, Ashish Rajput, and
Siddhant Matre in 2014 to ease inter-city rides. One of Roder's highlights was offering one-
way rides at nearly half the market price.
Industry – Car service
Founded – 2014
Dissolved – 2017
Reason for failure: The inability to cope with customer acquisition costs and not keeping up
with the user retention rates. Moreover, increased competition from experienced ventures
like Ola and Uber added to Roder's woes. Having a bigger competitor that is more
aggressively funded makes the entrepreneurs lose their zeal. And this is one of the major
causes of entrepreneurial failure.
5. Turant Delivery – The B2B startup was an intra-city logistics provider that was launched in
2015 to bring a new flavor to the Indian logistics industry. The algorithm followed by Turant
Delivery permitted it to offer services at a price as much as 15% less than what fellow
competitors charged for the same trip (as per the endeavor’s claim).
Industry – Logistics

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 Founded – 2015
Dissolved – May 2017
Reason for failure: The company did not have the funds to sustain itself in the long run. A
logistics service provider needs intensive cash flow to run. Hence, funding is essential for
any logistics startup.
6. Finomena – Students are the new target audience when it comes to offering small loans.
Acting on this, Finomena came out with an app that provided ‘EMI without cards’. The aim
was to allow students to purchase mobile phones and other electronics on a loan. In March
2016, Finomena raised its seeding funding and then made quick strides before going down in
2018.
Industry – Fintech
Founded – 2015
Dissolved – December 2017
Reason for failure: Finomena is counted amongst those Indian startups that failed
unexpectedly despite having enough funding. It was a fintech startup that focused on
providing loans, a segment already dominated by established players before its entry. Fierce
competition from rivals like ZestMoney was the major reason behind Finomena's failure.
Also, burning cash where it was not needed was another cause.
7. MrNeeds – MrNeeds was a grocery delivery startup founded by Hitashi Garg, Yogesh Garg,
Ravi Wadhwa, and Ravi Verma. It provided a subscription-based grocery delivery service.
People could easily pay for their subscriptions and receive their groceries on the set date.
MrNeeds, a Delhi-based startup, did well with more than 10,000 deliveries in Noida alone.
Industry – Grocery Delivery
Founded – 2016
Dissolved – 2018
Reason for failure: MrNeeds was a subscription-based startup. Hence, turnover might not
have been that great given how frugal Indians usually' tend to be. So it is possible that the
startup had a lack of funding to sustain itself. The entry of funded grocery delivery startups
like Grofers and Big Basket can also be another reason for MrNeeds' failure.

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8. Doodhwala – Founded in 2015, Doodhwala was a subscription-based platform that delivered
milk and grocery items directly to the customer's doorstep. Founded by Ebrahim Akbari and
Aakash Agarwal, Doodhwala claimed to complete about 30,000 deliveries in a day.
Industry – E-commerce
Founded – 2015
Dissolved – 2019
Reason for failure: According to experts, lack of funds and tough competition from the big
shots like BigBasket, Milkbasket, and SuprDaily caused Doodhwala to shut down. It is a
prime example of startups that failed in India that failed due to strong competitors.
9. Houseparty – Houseparty was a social media and video chat application that was founded
in 2016 by Ben Rubin, Sima Sistani, Itai Danino, and Scott Ahn. The app gained popularity
for its unique feature that allowed users to connect with friends in group video calls and play
games together in real time.
Industry – Social media , video
chat Founded – 2016
Dissolved – 2021
Reasons for failure: Houseparty’s closure was influenced by multiple factors, including the
decline of the pandemic, insufficient funding, and Epic Games' prioritization of other areas.
10. Dark Sky – Dark Sky was a weather forecasting app that provided hyperlocal weather
information and accurate forecasts to users. It was founded in 2011 by Adam Grossman and
Jack Turner. Dark Sky gained popularity for its user-friendly interface and precise weather
predictions, which were based on real-time data and advanced algorithms.
Industry – Weather and Forecasting
Founded – 2011
Dissolved – June 2021
Reasons for failure: Sky announced that it had been acquired by Apple and would be
discontinued on other platforms, including Android. The acquisition by Apple led to the
dissolution of Dark Sky as an independent entity, and its features were integrated into
Apple's own weather services.
11. Shop-x – Amit Sharma and Apoorva Jois founded the startup, which had secured a total
funding of $56.4 Mn from multiple rounds since its inception. The startup had received

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 backing from prominent investors, including Infosys co-founder Nandan Nilekani and Fung
Investments.
Industry – E-commerce
Founded – 2015
Dissolved – 2022
Reasons for failure: In August, the B2B e-commerce startup operated by 10i Commerce
Services had to close its operations and file for bankruptcy. In a filing with the Registrar of
Companies (RoC), the startup informed its board that it faced challenges in generating
sufficient cash flow or raising new capital through the sale of stakes.
12. Amazon Food, Distribution – In May 2020, Amazon Food entered the competitive Indian
food delivery market. However, after trying it out for more than two and half years, Amazon
decided to shut down its food delivery platform, which was being piloted in Bengaluru,
India, by 29 December 2022.
Industry – Food
Founded – May 2020
Dissolved – December 29, 2022
Reasons for failure Amazon Food failed in India due to stiff competition from established
players like Zomato and Swiggy, localization challenges in catering to diverse culinary
preferences, operational complexities in building a reliable network of restaurants and
delivery partners, and broader cost-cutting measures undertaken by Amazon in a challenging
economic environment.

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 CHAPTER 4 :FACTORS INFLUENCING STARTUP FAILURES
Despite having an effective plan, startup failures can arise for a variety of reasons. While a good
plan is necessary for success, there are various elements that might contribute to the failures of
startups in India. These factors are :-

1. Lack of market demand :- This factor refers to a situation where there isn't enough interest
or demand for the product or service a startup is offering. It's crucial for every startup to
identify and target a market that has a genuine need for what they're offering. Without a
strong demand, it becomes challenging for a startup to generate sales and sustain its
operations. Market research plays a vital role in understanding customer needs, preferences,
and trends. By conducting thorough market research, a startup can identify gaps in the market
and develop products or services that fulfill those needs. This factor emphasizes the
importance of aligning the startup's offerings with the demands of the target market.
2. Insufficient finding :- Insufficient funding occurs when a startup doesn't have enough
financial resources to support its operations and growth. Adequate funding is essential for
covering various expenses like product development, marketing, hiring talent, and scaling the
business. Startups often rely on external sources of funding, such as venture capital, angel
investors, or government grants. However, securing funding can be a challenging task,
especially for early-stage startups. It requires a well-prepared business plan, a compelling
value proposition, and a convincing pitch to attract potential investors. Startups can also
explore alternative funding options like crowd funding or bootstrapping to kick start their
operations. Insufficient funding can hinder a startup's ability to execute its plans, expand its
reach, and compete effectively in the market.
3. Poor product-market fit :- This factor occurs when the product or service a startup is
offering doesn't align well with the needs and preferences of the target market. It's important
for a startup to thoroughly understand its target audience, their pain points, and their
expectations. By conducting market research and gathering customer feedback, a startup can
fine-tune its offerings to match the market demand. Developing a strong product-market fit
involves continuous iteration and improvement based on customer insights. Startups should
focus on creating a unique value proposition that solves a specific problem or fulfills a

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 particular need in the market. By aligning their product or service with the target market,
startups can increase customer satisfaction, drive sales, and gain a competitive edge.
4. Insufficient marketing and sales strategy :- When it comes to startups, having a solid
marketing and sales strategy is crucial for success. Ineffective strategies can hinder a startup's
ability to reach its target audience, generate leads, and ultimately convert them into paying
customers. One common mistake is not clearly defining the target market. Without a clear
understanding of who your ideal customers are, it becomes challenging to tailor your
marketing efforts to resonate with them. Identifying the specific demographics, interests, and
pain points of your target audience can help you create targeted campaigns that are more
likely to generate interest and engagement. Another challenge is not utilizing the right
marketing channels. Startups often have limited budgets, so it's essential to choose the most
effective channels to reach your target audience. This could include social media platforms,
content marketing, search engine optimization (SEO), or even traditional advertising
methods. It's important to research and experiment with different channels to find what
works best for your business. Additionally, startups may struggle with ineffective sales
strategies. This could include not having a clear sales process, lacking proper sales training,
or not effectively communicating the value proposition of their product or service. Building a
strong sales team and providing them with the necessary tools and training can greatly
improve your chances of converting leads into customers.
5. Lack of competitive advantage :- This factor states that startups struggle to stand out from
their competition. Without a unique selling point or something that sets them apart, it
becomes harder for them to attract customers. In a crowded market, having a competitive
advantage is crucial for success. It could be a superior product, a lower price, exceptional
customer service, or any other unique feature that makes customers choose one startup over
another. Without this advantage, startups may find it challenging to gain traction and grow
their customer base. So, it's important for startups to identify and leverage their competitive
advantage to differentiate themselves and thrive in the market.
6. Inadequate business planning :- This means that startups can face difficulties when they
don't have a solid plan in place to guide their operations and decision-making. A well-
thought-out business plan is like a roadmap that helps startups navigate the challenges and
uncertainties of the business world. It outlines the company's goals, strategies, target market,

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 financial projections, and more. Without a clear plan, startups may lack direction and
struggle to make informed decisions. Additionally, a good business plan allows startups to
anticipate potential obstacles and develop contingency plans. It also helps in securing
funding and attracting investors who want to see a solid plan for success. So, it's crucial for
startups to invest time and effort into developing a comprehensive business plan to set
themselves up for long-term success.
7. Weak leadership and management skills:-When it comes to weak leadership and
management skills, it can really affect the success of a team or organization. Weak leadership
means that the person in charge may struggle to provide clear direction or make effective
decisions. This can lead to confusion and a lack of focus within the team. Without a strong
leader, it's hard to set goals and motivate everyone to work towards them. On the
management side, weak skills can result in poor communication and collaboration. A good
manager knows how to keep everyone on the same page, encourage teamwork, and resolve
conflicts. But if someone lacks these skills, it can cause misunderstandings and a breakdown
in productivity. Another consequence is the difficulty in attracting and retaining talented
employees. People want to work in an environment where they can learn and grow. If the
leadership and management aren't up to par, it's hard to create that kind of atmosphere. This
can lead to high turnover and a loss of valuable skills and knowledge. Overall, weak
leadership and management skills can really hold back a team or organization. It's important
for leaders to continuously develop their skills and seek out opportunities for growth. By
doing so, they can create a positive and productive work environment where everyone can
thrive.
8. Limited access to resources:- Limited access to resources is a critical factor that can
contribute to the failure of startups in India. When startups face resource constraints, it
becomes challenging to execute their plans effectively. One major resource constraint is
financial. Another resource constraint is a lack of skilled talent. Startups need a competent
team to drive their vision forward, but finding and retaining skilled employees can be
difficult, especially when competing with established companies. Limited access to a pool of
qualified candidates can hamper a startup's ability to innovate and execute its strategies.
Additionally, startups may face limited access to infrastructure and technology. Access to
modern facilities, equipment, and technological advancements is crucial for startups to stay

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 competitive. Without adequate resources in this regard, startups may struggle to deliver high-
quality products or services efficiently. Moreover, limited access to mentorship, industry
networks, and business support services can hinder startups' growth and learning
opportunities. These resources can provide valuable guidance, connections, and knowledge
that startups need to navigate challenges and seize opportunities.
9. Inability to adapt to market changes:- One of the key factors that can lead to the failure of
startups in India is the inability to adapt to market changes. In today's rapidly evolving
business landscape, it is crucial for startups to stay agile and responsive to shifts in consumer
behavior, industry trends, and competitive dynamics. When startups fail to adapt to market
changes, they risk becoming irrelevant or losing their competitive edge. This can occur due
to various reasons. For instance, startups may become too attached to their initial business
model or product offering, failing to recognize the need for adjustments or pivots as market
demands evolve. They may also overlook emerging trends or fail to anticipate shifts in
customer preferences, resulting in a mismatch between their offerings and what the market
demands. Furthermore, startups that lack a culture of continuous learning and
experimentation may struggle to adapt. It is essential for startups to gather and analyze
market feedback, engage with customers, and monitor industry trends to identify
opportunities for innovation or course correction. The inability to adapt to market changes
can also stem from internal factors such as organizational rigidity, resistance to change, or a
lack of flexibility in decision-making processes. Startups must foster a culture of adaptability,
encourage open communication, and empower employees to contribute ideas and insights
that can help the company navigate market fluctuations.
10. High competition :- High competition can definitely be a factor that leads to the failure of
startups. Limited brand recognition and customer loyalty can make it difficult for startups to
attract and retain customers. Moreover, high competition can lead to price wars and reduced
profit margins. Startups may be forced to lower their prices to remain competitive, which can
negatively impact their financial sustainability. Additionally, competing with larger, well-
funded companies can make it harder for startups to access resources, talent, and
partnerships. To overcome the challenges of high competition, startups need to focus on their
unique value proposition and find ways to differentiate themselves. This could involve
offering innovative features, providing exceptional customer service, or targeting niche

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 markets. Building strong relationships with customers and creating a loyal customer base can
also help startups thrive amidst competition.
11. Legal and regulatory challenges:- Legal and regulatory challenges can definitely be a
major factor contributing to the failure of startups. In any industry, startups have to navigate
a complex web of laws, regulations, and compliance requirements. Failure to understand and
comply with these legal and regulatory frameworks can have serious consequences. Startups
may face challenges related to licensing, permits, intellectual property rights, data protection,
and employment laws, among others. These challenges can arise at both the local and
national levels, making it crucial for startups to have a clear understanding of the legal
landscape in which they operate. Failure to comply with legal and regulatory requirements
can result in fines, penalties, lawsuits, or even the shutdown of the business. Startups may
also face reputational damage and loss of customer trust if they are found to be operating in
violation of the law. To mitigate legal and regulatory challenges, startups should prioritize
legal compliance from the outset. Seeking legal counsel and guidance can help startups
understand their obligations and navigate the complexities of the legal landscape. It is
important for startups to stay updated on relevant laws and regulations, and to establish
robust internal processes and systems to ensure compliance. Additionally, startups should
proactively engage with regulatory authorities and industry associations to stay informed
about any changes or updates in the legal framework. Building strong relationships with legal
experts and staying abreast of industry best practices can also help startups address legal and
regulatory challenges effectively.
12. Poor financial management :- Poor Financial management leads to the mismanagement of
finances within a startup. It's essential for startups to have a clear understanding of their
financial situation and to effectively manage their resources. Poor financial management can
lead to a variety of issues, such as cash flow problems, excessive spending, or failure to
allocate funds properly. Startups need to keep track of their expenses, maintain accurate
financial records, and make informed financial decisions. This includes budgeting,
forecasting, and ensuring that there's enough capital to sustain the business. It's also
important to have a plan for managing debt, if any, and to seek professional advice if needed.
By practicing good financial management, startups can improve their chances of success and

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 avoid common pitfalls that come with financial instability. It's all about making smart
financial choices and staying on top of the numbers.
13. Lack of scalability :- The lack of scalability factor states that startups can face challenges if
they are unable to grow and expand their operations to meet increasing demands. Scalability
involves the ability to handle growth without compromising the quality of products or
services. Without scalability, startups may struggle to keep up with customer demands,
experience operational inefficiencies, or face limitations in their ability to reach new markets.
It's important for startups to plan for scalability from the early stages by building a flexible
infrastructure, adopting scalable technologies, and implementing processes that can
accommodate growth. By prioritizing scalability, startups can adapt to changing market
conditions, seize new opportunities, and sustain long-term success. So, it's crucial for startups
to consider scalability as a key factor in their business strategy and prepare for future growth.
14. Ineffective cost management:- Ineffective cost management can definitely be a reason why
startups fail. When startups don't effectively manage their costs, it can lead to financial
instability and even bankruptcy. Startups often have limited financial resources, so it's crucial
for them to carefully monitor and control their expenses. If costs aren't managed properly,
startups can quickly run out of money and be unable to sustain their operations. Common
cost management mistakes include overspending on unnecessary expenses, underestimating
costs, and not having a clear budget or financial plan. Startups may also struggle with pricing
their products or services appropriately, leading to low profit margins or difficulty generating
revenue. To overcome ineffective cost management, startups should prioritize creating a
detailed budget and financial plan. This involves identifying all the costs associated with
running the business and setting realistic revenue goals. Regularly reviewing and adjusting
the budget can help startups stay on track and make necessary adjustments. Startups should
also explore cost-saving strategies, such as finding more affordable suppliers, optimizing
operational processes, and leveraging technology to streamline operations.
15. Lack of customer focus:- A lack of customer focus is a significant factor contributing to
startup failure. Startups often prioritize product development or internal processes over
understanding and meeting customer needs. Without a clear understanding of their target
audience, startups risk developing products or services that fail to resonate with customers or
address their pain points effectively. This can lead to low customer satisfaction, limited

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market adoption, and ultimately, failure. Successful startups prioritize customer-centric
approaches, actively seeking feedback, conducting market research, and iterating their
offerings based on customer insights. By placing the customer at the center of their
operations, startups can better align their products or services with market demand, improve
customer satisfaction, and increase their chances of long-term success .

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 CHAPTER 5 : ANALYSIS AND INTERPRETATION

In this chapter we will study about the analysis and discussion of the results of the empirical
study. The statistical processing of the collected data is addressed, as well as the presentation and
analysis of the processed data. The results are presented, analyzed and interpreted in relation to
the research questions and the research objective which was to determine the factors which
influence the failure of startup in India. This chapter is set out under the following main
headings: demographic information of business owners/managers; business profile; factors
associated with startup failure in India.

5.1 Demographic profile.

The purpose of this section was to obtain a demographic profile of respondents.

5.1.1 Age

Table 5.1 illustrates the frequency divided into five distinct age groups of the failed startup
owners/managers who participated in the study.

Table 5.1 Age group of respondents

Frequency Percent Valid Percent Cumulative

Percent
Valid 21-30 19 17.6 17.6 17.6
31-40 38 35.2 35.2 52.8
41-50 32 29.6 29.6 82.4
51-60 13 12.0 12.0 94.4
61- above 6 5.6 5.6 100.0
Total 108 100.0 100.0

Respondents in the age group 31 to 40 years represent the highest percentage (35.2%) of the
whole, while the age group of 41 to 50 years follows as the second highest percentage (29.6%).
The young group from 21 to 30 years made up 17.6%, while the older age groups of 51 to 60
years and the 61 years and above returned 12% and 5.6% respectively. It can be deduced from

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these results that the majority of respondents were in the age group 31 to 40 years. The reason
could be that by this age most people have determined a career path, they have completed their
studies, have started families and are seeking the best way in which to support their families.
There was only a slight difference between the age range from 31 to 40 years (35.2%) and 41 to
50 years (29.6%), both being life stages at which people could more likely cope with the time,
effort, finance and resources required in starting a business. These results indicate that the young
group from 21 to 30 years make up 17.6% of respondents who own/manage businesses

Age
40
35.2
35
29.6
30

25

20 17.6
Age
15 12
10
5.6
5

0
21-30 31-40 41-50 51-60 60- above

5.1.2 Gender

In research endeavors like this, it is common practice to ascertain the gender of the participants.
Table 5.1 presented below illustrates the gender distribution among respondents in this survey.

Table 5.2: Gender of respondents

Frequency Present Valid Percent Cumulative

Percent
Valid Male 76 70.4 70.4 70.4
Female 32 29.6 29.6 100.0
Total 108 100.0 100.0

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Table 5.2 above reveals that more than two thirds (70.4%) of the respondents were males, while
females represented 29.6% of the total. This result indicates a significant disparity between the
genders and suggests that more males than females actively own/manage startups which have
failed. This implies that most failed startups in these countries were owned by males.

Gender

29.60%
Male - 70.4%
female - 29.6%

70.40%

5.2 Startup profile:

The purpose of this section was to collect data on various characteristics of the failed startups in
India.

5.2.1 Failed startups – number of employees :-

Table 5.3 below indicates the number of employees employed by failed startup under this
startup.

Frequency Present Valid Percent Cumulative Percent

Valid 1- 10 3.4 3.4 3.4
11- 50 86.1 86.1 89.5
51- 100 10.5 10.5 100.00
Total 100.00 100.00

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 Number of employees

3.4
10.5

1 to 10
11 to 50
51 to 100

86.1

The results above reveal that 86.1% of the failed startup employed between 11 to 50 employees,
10.5% had from 51 to 100 employees and 3.4% of the failed businesses had between 1 to 10
employees. These results can further be argued that the relationship between the ranges from 11
to 50 employees and 51 to 100 employees fall into the category of startup in India, which
indicate that a total of 96.6% (86.1% plus 10.5%) of the failed startups, while 3.4% (startup that
had between 1 to 10 employees) fall into the category of micro startup. As this study is based on
investigation of the failure of startups in India, these study results confirm that data was collected
from the correct population to ascertain validity.

5.2.2 Types of startups failed :-

Table 5.4 below illustrates the sectors in which the failed startups operated.

Frequency Present Valid Percent Cumulative Percent

Valid Service 20.4 20.4 20.4
Retailer 29.6 29.6 50.00
Wholesaler 14.8 14.8 64.8
Manufacturing 13.9 13.9 78.7
Others 21.3 21.3 100.00

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 Total 100.00 100.00
Table 5.4 Startups operating sector

Types of startups
failed

21.3 20.4
Service
Retailer
Wholesaler
13.9 Manufacturing

29.6 Others

14.8

Table 5.4 reveals that nearly one third (29.6%) of the failed startups were operating as retailers,
while 20.4% were businesses relating to services and 14.8% were wholesalers. While the 13.9%
were in the manufacturing sector and 21.3% were in the other sector. The results above indicate
that the majority of failed startups in India were operating in the retail sector. However, these
retailers as well as the wholesalers in India operated in diverse sectors, importing and selling a
wide range of products. The second most predominant sector was startups offering services such
as construction, car-washing, retreading tyres and laundry.

5.2.3 Lack of successful startup person as a role model or a mentor :-

Table 5.5 shows results of whether respondents had the benefit of a successful startups person as
a mentor or role model prior the startups failure.

Frequency Present Valid Percent Cumulative Percent

Valid Yes 41 38.00 38.00 38.00
No 67 62.00 62.00 100.00
Total 108 100.00 100.00
Table 5.5 Absence of successful startup person as a mentor or role model

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63 | P a g e
 Absence of successful startup person as a
mentor or role model

38
Yes
No
62

These results indicate that 62% of respondents did not have a successful startup person as a
mentor or role model prior to startup failure, while 38% of respondents had experienced this.
This study found that the majority of respondents (62%) did not have the benefit of having a
successful startup person as a mentor or role model. Exposure to a successful startup person
could inspire a new entrepreneur and allow them to gain invaluable knowledge of management
and business systems. Several authors support the notion that the presence of individuals to
transfer the relevant entrepreneurial experience is crucial, as the absence of successful
entrepreneurial role models is believed to influence startups.

5.2.4 Possession and use of a startup plan:-

Table 5.6 below reveals whether the failed businesses (respondents) had a business plan or not.

Frequency Present Valid Percent Cumulative Percent

Valid Yes 43 40.6 40.6 40.6
No 65 59.4 59.4 100.00
Total 108 100.00 100.00
Table 5.6 Failed venture possession of a startups plan

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 Failed venture possession of a startup plan

40.6
Yes

No
59.4

The results above reveal that the majority of respondents (59.4%) did not have a startups plan for
their venture, while 40.6% of respondents did have a startups plan. The lack of a startup plan
could prevent the entrepreneur from critically thinking through all aspects of their startups. It can
be argued that a startups plan would give the startup owners/managers the insight to startups
environmental trends and risks that possibly could affect their venture and assist them to make
sound decisions to mitigate failure. However, some of startups that had startups plans still
suffered startups failure. Furthermore, those respondents who stated that they had a startups plan
were asked to indicate how often they operated their startup according to the startups plan.

5.2.5 Frequency of using startup plan:-

Frequency Present Valid Percent Cumulative Percent

Valid Never 9 20.9 20.9 20.9
Rarely 14 32.6 32.6 53.5
Sometimes 12 27.9 27.9 81.3
Often 2 4.7 4.7 86.0
Always 6 14.0 14.0 100.00
Total 43 100.00 100.00
Table 5.7 Frequency of using startup plan

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 Frequency of using startup plan

14
20.9
4.7 never
rarely
sometimes
often
27.9 always
32.6

Table 5.7 above indicates that 20.9% of respondents had never operated their startup in
accordance with their startup plans, while 32.6% had rarely and 27.9% had sometimes.
Furthermore, 14% of respondents had always operated their startup in accordance with their
startup plan, while 4.7% responded that they had often operated in accordance with their startup
plan. From the 43 respondents that had a startup plan for the failed startups in India, as presented
in Table 5.7, it was found that 81.3% (20.9% never, plus 32.6% rarely, plus 27.9% sometimes) of
them did not operate their startups in accordance with their startups plans, versus a total of 18.7%
(14% always plus 4.7% often) that had operated their startups in accordance with their startup
plan.

5.3 Factors associated with startups failure in India:-

This section was developed with the intention to assess the actual reasons for startup failure in
India. However, a series of variable factors that could be the cause of startup failure were
provided to respondents and tested under a four-point Likert scale level of agreement (strongly
disagree, disagree, agree and strongly agree).

5.3.1 Lack of knowledge in the domain of the startup to fail:-

Table 5.8 below represents the results regarding respondents’ lack of knowledge in the field in

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which they were operating their startup.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 42 38.9 38.9 38.9
Agree 35 32.4 32.4 71.3
Disagree 12 11.1 11.1 82.4
Strongly Disagree 19 17.6 17.6 100.0
Total 108 100.0 100.0

45
38.9
40

35 32.4
30

25

20 17.6

15
11.1
10

0
strongly agree agree disagree strongly disagree

Table 5.8 Insufficient knowledge in the domain of startup

The results indicate that a total of 71.3% (32.4% agree plus 38.9% strongly agree) of respondents
in India agreed that insufficient knowledge of domain of startup caused their startups to fail,
while 28.7% (11.1% disagree plus 17.6% strongly disagree) of respondents disagreed with this
statement. With reference to the results above, this research found that a very significant 71.3%
of respondents agreed that insufficient knowledge in their domain of startup has influenced their
startup failure. This result found that insufficient understanding of the startup system and lack of
management experience are key factors which contribute to startup failure. Entrepreneurs should
possess the required skills and knowledge to start a startup, they must be well informed about the
startup system and the industry, have a good knowledge of the product or service offered, have
management skills and be able to quickly learn new skills as the business might require. The

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results of this study highlight that lack of knowledge in the domain of the startup system is a key
issue contributing to startup failure.

5.3.2 Lack of relevant leadership skills that took the startup to fail:-

Table 5.9 illustrates responses from respondents regarding lack of leadership skills as a
contributing factor to their startup failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 31 28.7 28.7 28.7
Agree 44 40.7 40.7 69.4
Disagree 18 16.7 16.7 86.1
Strongly Disagree 15 13.9 13.9 100.0
Total 108 100.0 100.0
Table 5.9: Lack of leadership skills caused startups to fail

45
40.7
40

35

30 28.7

25

20 16.7
13.9
15

10

0
Strongly agree Agree Disagree Strongly Disagree

The above results indicate that a total of 69.4% (40.7% agree plus 28.7% strongly agree)
of respondents agree that lack of leadership skills contributed to their startup failure,
while 30.6% (16.7% disagree and 13.9% strongly disagree) disagreed with this statement.

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A significant majority of respondents agreed that insufficient leadership skills is a
problem which caused their businesses to fail, though 30.6% of respondents disagreed.

5.3.3 Lack of management control:-

Table 5.10 below presents the results regarding loss of management control due to work
overload.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 23 21.5 21.5 21.5
Agree 50 46.7 46.7 68.2
Disagree 23 21.5 21.5 89.7
Strongly Disagree 12 10.2 10.2 100.0
Total 108 100 100
Table 5.10: Loss of management control due to work overload

50 46.7
45

40

35

30

25
21.5 21.5
20

15
10.2
10

0
Strongly agree Agree Disagree Strongly disagree

A total of 68.2% (46.7% agree plus 21.5% strongly agree) of respondents agreed that being the
only person in control and being overloaded the work, contributed to their startup failure, while
31.8% (21.5% disagree plus 10.3% strongly disagree) disagreed with this statement. The results
indicate that the majority of respondents agreed that work overload caused by their failure to

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delegate certain responsibilities to their subordinates, had led to the failure of their startups. This
found that overload of work and poor communication skills were common reasons for failure. To
maintain that a successful entrepreneur should build useful networks, possess good interpersonal
relations skills, communication skills, conflict management skills and have the ability to trust
and delegate.

5.3.4 Lack of management’s internal communication skills:-

Table 5.9 below shows results on management’s ineffective communication with employees.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 16 14.8 14.8 14.8
Agree 12 11.1 11.1 25.9
Disagree 31 28.7 28.7 54.6
Strongly Disagree 49 45.4 45.4 100.0
Total 108 100 100
Table 5.11 Ineffective management communication with employees

50
45.4
45

40

35

30 28.7

25

20
14.8
15
11.1
10

0
Strongly agree Agree Disagree Strongly Disagree

A total of 74.1% (28.7% disagree plus 45.4% strongly disagree) respondents disagree that
ineffective communication with their employees was the cause of their startup failure, while
25.9% (11.1% agree plus 14.8% strongly agree) agree with this statement. These results indicate

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that nearly three quarters of the respondents disagree that a lack of effective management internal
communication was a contributing factor to startup failure. This suggests that the startup
owners/managers in India believe that they do communicate effectively and disseminate
information to employees.

5.3.5 Lack of effective communication with external stakeholders:-

Table 5.12 below shows results of poor communication by management with external
stakeholders.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 22 20.6 20.6 20.6
Agree 35 32.7 32.7 53.3
Disagree 36 33.6 33.6 86.9
Strongly Disagree 15 13.1 13.1 100.0
Total 108 100 100
Table 5.12 Lack of good communication with external stakeholders

40

35 33.6
32.7

30

25
20.6
20

15 13.1

10

0
Strongly agree Agree Disagree Strongly diagree

A total of 53.3% (32.7% agree plus 20.6%) of respondents agree that poor communication
between the business and its customers, suppliers and others organizations has contributed to the
startup failure, while 46.7% (33.6% disagree plus 13.1% strongly disagree) disagree with this

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statement. The results were divided with just over half of the respondents agreeing that lack of
clear communication with external stakeholders could contribute to startup failure, while just
under half disagreed. This emphasizes the fact that good business communication with
customers, suppliers and lenders is crucial for any business to be successful and sustainable.

5.3.6 Insufficient managerial experience:-

Table 5.13 presents results on lack of management experience of respondents (managers/owners

of small businesses) for the failed startup in India.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 22 20.6 20.6 20.6
Agree 35 32.7 32.7 53.3
Disagree 36 33.6 33.6 86.9
Strongly Disagree 15 13.1 13.1 100.0
Total 108 100 100
Table 5.13 insufficient managerial experience

40
35 32.7 33.6

30
25 20.6
20
15 13.1

10
5
0
Strongly agree
Agree Disagree Strongly
Disagree

A total of 66.4% (24.3% agree plus 42.1% strongly agree) of respondents agreed with this
statement while 33.6% (8.4% disagree plus 25.2% strongly disagree) disagreed. The results
indicate that almost two thirds of the respondents agreed that insufficient management
experience caused their startup to fail. It state that a culture that accentuates the importance of

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entrepreneurial structures, passing on the relevant entrepreneurial knowledge and enabling the
practice, possibly enhances the viability of the entrepreneur's business.

5.3.7 The need for a professional adviser :-

Table 5.14 depicts results related to the absence of professional advice as being a contributing
factor to business failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 37 34.3 34.3 34.3
Agree 28 25.9 25.9 60.2
Disagree 31 28.7 28.7 86.9
Strongly Disagree 12 11.1 11.1 100.0
Total 108 100 100
Table 5.14: Absence of a professional adviser

Table 5.14 above reveals that a total of 60.2% (34.3% agree plus 25.9% strongly agree) of
respondents agreed that lack of professional advice caused their startup to fail, while 39.8%
(28.7% disagree plus 11.1% strongly disagree) disagreed with this notion. These findings
indicate that the majority of respondents felt the absence of advice from startup experts
contributed to their startup failure.

5.3.8 Poor pricing strategy as a cause of startup failure:-

Table 5.15 below depicts the participants’ responses regarding the low or high price strategy as a
contributor to startup failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 9 6.6 6.6 6.6
Agree 19 17.9 17.9 24.6
Disagree 61 57.5 57.5 82.1
Strongly Disagree 19 17.9 17.9 100.0
Total 108 100 100
Table 5.15: Low or high price strategy as a contributor to startup failure

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Table 5.15 above shows that a total of 74.4% (57.5% disagree plus 17.9% strongly disagree)
respondents disagree that low price or high price strategy are the cause of their startup failure
while 24.6% (17.9% agree plus 6.6% strongly agree) respondents agree with this statement.
These results indicate that nearly three quarters of the respondents disagree that a poor price
strategy contributed to their startup failure. This implies that poor pricing strategy did not
significantly contribute to the startup failures. Notably, highly priced products or services could
decrease the demand if customers perceived them as not being good value for money, while
prices which are too low could result in lower income. Small startup managers should not neglect
the importance of suitable price strategies as customers are very sensitive to these factors.

5.3.9 High uncontrolled expenditure took the startup to failure:-

The results in Table 5.16 illustrate responses regarding uncontrolled expenditure as a cause of
startup failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 46 43.0 43.0 43.0
Agree 34 31.8 31.8 74.8
Disagree 10 8.4 8.4 83.2
Strongly Disagree 18 16.8 16.8 100.0
Total 108 100 100
Table 5.16: Uncontrolled expenditure as a cause of startup failure

Table 5.16 indicates that 74.8% (31.5% agree plus 43% strongly agree) of respondents agreed
that uncontrolled expenditure possibly influenced their startup failure, while 25.2% (8.4%
disagree plus 16.8% strongly disagree) of respondents disagreed with this statement. The results
above indicate that nearly three quarters (74.8%) of the respondents agreed that uncontrolled
expenditure had contributed to their startup failure. It found that poor cost control could
contribute to the failure of many startups. It maintain that ventures with a continuously negative
monthly balance can experience a shortage of operational cash and the startup becomes
unsustainable. These results imply that respondents neglected to analyze the effects that poor
cost control and uncontrolled spending could have on their startups.

5.3.10 Failure to pay monthly lenders’ interest:-

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Table 5.17 shows results for respondents avoiding to repay interest incurred on money or
products received in credit from lenders or suppliers.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 11 10.3 10.3 10.3
Agree 29 27.1 27.1 37.4
Disagree 39 36.4 36.4 73.8
Strongly Disagree 29 26.2 26.2 100.0
Total 108 100 100
Table 5.17: Avoiding payment of lenders’ interest as a cause of failure.

Table 5.17 indicates that a total of 62.6% (36.4% disagree plus 26.2% strongly disagree) of
respondents disagreed that avoiding to repay lenders on a monthly basis had caused their
businesses failure, while 37.4% (27.1% agree plus 10.3% strongly agree) of respondents agreed
with this statement. The study results indicate that the majority of respondents disagreed that
failure to repay interest to lenders caused their startups to go bankrupt. Entrepreneurs should not
neglect to effectively manage their finances and operations, and fulfill their obligations as per
their loan agreements. Money borrowed from lenders or products received in credit carry some
debt risks and the failure to fulfill repayment obligations can cause the business to go bankrupt.

5.3.11 Lengthy cash conversion period:-

Table 5.18 indicates that a total of 53.7% (27.8% agree plus 25.9% strongly agree) of
respondents agreed that the delay in converting goods to cash and holding products in store for
lengthy periods, negatively influenced their business, while 46.3% (24.1% disagree plus 22.2%
strongly disagree) disagreed.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 28 25.9 25.9 25.9
Agree 30 27.8 27.8 53.7
Disagree 26 24.1 24.1 77.8
Strongly Disagree 24 22.2 22.2 100.0
Total 108 100 100
Table 5.18: Delay in the conversion of goods to cash

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The above results indicate that slightly over half of the respondents felt that they experienced
startup failure due to the retention of goods in store and the delay in converting goods to cash.
Perhaps the lengthy conversion period was caused by less customer demand due to high
competition, low product quality or obsolescence. It maintain that keeping a large amount of
inventory in warehouse may cause cash flow problems and place the operational process at risk,
as much of the operational capital will be tied up in these products. In contrast, keeping
inventory levels too low may result in loss of sales as a result of an out-of-stock situation. Small
startup owners/managers should maintain inventory at a level that can minimize cost and risk and
utilize a suitable inventory control system for effective management.

5.3.12 Failure to comply with tax regulations:-

Table 5.19 reflects results on respondents failing to comply with tax regulations.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 8 7.4 7.4 7.4
Agree 17 15.7 15.7 23.2
Disagree 51 47.2 47.2 70.4
Strongly Disagree 32 29.6 29.6 100.0
Total 108 100 100
Table 5.19: Non-payment of taxes

Results above indicate that 76.8% (47.2% disagree plus 29.6% strongly disagree) of respondents
disagreed that non-compliance with government tax regulations was the cause of their startup
failure, while 23.2% (15.7% agree plus 7.4% strongly agree) agreed with this notion. Tax
avoidance can result in high costs to the startup, imposed as penalties or to a startup being closed
down by the relevant tax authorities. Good business management involves complying with the
government regulations such as payment of tax and basic conditions of employment.

5.3.13 Lack of marketing planning:-

Table 5.20 below indicates that a total of 69.1% (35.5% agree plus 33.6% strongly agree) of
respondents agreed that lack of a proper marketing plan had contributed to their business failure
while 30.9% (20.6% disagree plus 10.3% strongly disagree) disagreed.

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 Frequency Present Valid Percent Cumulative Percent
Valid Strongly agree 36 33.3 33.6 33.6
Agree 38 35.2 35.5 69.1
Disagree 22 20.4 20.6 89.7
Strongly Disagree 11 10.2 10.3 100.0
Total 107 99.1 100.0
Missing system 1 .9
Total 108 100.0
Table 5.20: The lack of marketing planning as a cause of failure

These results correlate with the findings in Table 5.6 which revealed that 59.4% of respondents
agreed that lack of a business plan contributed to their failed venture. It found that the majority
of small businesses are at risk of failure due to lack of marketing and financial planning. The
failure to have a marketing plan may drastically affect the business’ position in the market, as it
would lack a thorough analysis of its products, prices, promotions, sales and distribution. The
marketing plan would also help business managers to thoroughly analyze customers, raw
materials and competitors in the market.

5.3.14 Lack of financial planning:-

Table 5.21 illustrates respondents’ responses on lack of a financial plan being a contributing
factor to business failure. A financial plan should be regarded as an essential tool by
management, as it is necessary to sustain the startups’ viability.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 47 43.5 43.5 43.5
Agree 38 35.2 35.2 78.7
Disagree 23 21.3 21.3 100.0
Total 108 100.0 100.0
Table 5.21: Lack of financial plan as a cause of failure

The results above indicate that an overwhelming majority of 78.7% (35.2% agree plus 43.5%
strongly agree) of respondents agreed that the lack of a financial plan had contributed to their

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startup failure while 21.3% disagreed. There was no frequency response for ‘strongly disagree’.
It found that neglecting to monitor and effectively manage business resources and budgets to
ensure a sustainable business turnover, is one of the primary reasons many businesses fail. It
found that major failure factors were associated with lack of effective accounting functions. The
above results suggest that the respondents neglected to develop a sound financial plan, which
would have ensured that resources were efficiently managed to meet the overall business
expenses.

5.3.15 Lack of financial accounting skills:-

Financial skills are crucial to the viability of a business. Table 5.22 illustrates respondents’
responses to this statement.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 33 30.6 30.6 30.6
Agree 54 50.0 50.0 80.6
Disagree 1 0.9 0.9 81.8
Strongly Disagree 20 18.5 18.5 100.0
Total 108 100 100
Table 5.22: Lack of financial accounting skills

Table 5.22 above illustrates that an overwhelming 80.6% (50% agree plus 30.6% strongly agree)
of respondents agreed that lack of financial accounting skills caused their businesses to fail while
only 19.4% (0.9% disagree plus 18.5% strongly disagree) disagreed. These results indicate that
lack of financial accounting skills was a very significant contributing factor to startup failures in
India. The most startup fail because managers lack the financial accounting skills to manage all
financial aspects of their business and to achieve appropriate returns on investments. It is
founded that in today's trading environment, managers who lack the skill to master and manage
their financial resources may not be able to sustain their businesses in the market. Conversely, it
implies that management with good financial skills would be able to successfully sustain their
businesses.

5.3.16 Failure to record startup transactions:-

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Table 5.23 below illustrates results regarding the maintenance of financial records for the
businesses surveyed.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 52 48.1 48.1 41.8
Agree 34 31.5 31.5 79.6
Disagree 16 14.8 14.8 94.4
Strongly Disagree 6 5.6 5.6 100.0
Total 108 100 100
Table 5.23: Failure to record startups transactions

The results above show that a very significant 79.6% (31.5% agree plus 32.4% strongly agree) of
respondents agreed that failure to record startup transactions was a contributing factor to their
startup failure, while 20.4% (30.6% disagree plus 5.6% strongly disagree) of respondents
disagreed with this statement. This study ascertained that more than three quarters (79.6%) of
respondents in the India agreed that lack of cash flow control had contributed to their startup
failure. It is found that failure to control cash, including effective debtor management, causes the
failure of startups. Considering the above, the researcher believes that an accurate recording and
analysis of cash flow could alert one to potential startup failure.

5.3.17 Failure to effectively control startup resources:-

Table 5.24 below shows the results of whether respondents considered inadequate control of
resources to be a contributing factor to startup failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 28 25.9 26.2 26.2
Agree 49 45.4 45.8 72.0
Disagree 7 6.5 6.5 78.5
Strongly Disagree 23 21.3 21.5 100.0
Total 107 99.1 100.0
Missing system 1 0.9
Total 108 100.0
Table 5.24: Insufficient control of startup resources as a cause of failure

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The results above indicate that a significant 72% (45.8% agree plus 26.2% strongly agree) of
respondents agreed that inadequate control of startups resources (such as finance, raw material,
finished product, equipment and employees) contributed to their business failure, while 28%
(6.5% disagree plus 21.5% strongly disagree) of respondents disagreed with this notion. Failure
to effectively utilize and control all resources can critically affect the business. All business
assets should be registered, monitored and controlled for effective and successful management of
a business. Therefore, the business owners/managers (respondents) should not disregard the
importance of controlling raw materials, finished products, equipment and employees.

5.3.18 Customers fail to pay their bad debts:-

Table 5.25 shows results regarding irrecoverable debts from customers.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 21 19.4 19.4 19.4
Agree 18 16.7 16.7 36.1
Disagree 39 36.1 36.1 72.2
Strongly Disagree 30 27.8 27.8 100.0
Total 108 100 100
Table 5.25: Customers' failure to pay debts

The above results indicate that a total of 63.9% (36.1% disagree plus 27.8% strongly disagree) of
respondents disagreed that irrecoverable customers' debts had influenced their startup failure,
while 36.1% (16.7% agree plus 19.4% strongly agree) of respondents agreed with this statement.
The research results indicate that the majority of respondents disagreed that they experienced
cash shortage due to bad debts. It can be assumed from these findings that most startup
owners/managers would Endeavour to obtain payment from debtors in order to avoid shortage of
cash flow. However, if sales are made and customers show unwillingness to pay, recovery
procedures must be implemented rigorously to avoid bad debts.

5.3.19 Cash flow problems at the start-up stage:-

The results in Table 5.26 below indicate responses from respondents regarding lack of capital at
the start-up stage of their businesses.

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 Frequency Present Valid Percent Cumulative Percent
Valid Strongly agree 34 31.5 31.5 31.5
Agree 31 28.7 28.7 60.2
Disagree 19 17.6 17.6 77.8
Strongly Disagree 24 22.2 22.2 100.0
Total 108 100 100
Table 5.26: Lack of capital at start-up stage

Results show that 60.2% (28.7% agree plus 31.5% strongly agree) of respondents agree that lack
of capital at the start-up stage caused their startup to fail, while 39.8% (17.6% disagree plus
22.2% strongly disagree) of respondents disagreed with this proposition. One of the major
factors which contribute to failure. The shortage of capital at the start-up stage is often
experienced due to the high initial cash outlay for purchase of fixed assets, staff training, creating
brand awareness and a negative cash flow. They further state that shortage of money for startup
operations at the start-up stage is absolutely one of the key factors that causes new startups to
fail. Therefore, the researcher believes it is the responsibility of startup owners/managers have
enough funds in reserve to cover the first months of operations, so that shortage of cash flow is
avoided.

5.3.20 Poor management of startup bank account:-

Table 5.27 below indicates that a total of 72% (33.6% agree plus 38.3% strongly agree) of
respondents agreed that failure to use separate bank accounts for business and personal needs has
contributed to the failure of their startups, while 28% (16.8% disagree plus 11.2% strongly
disagree) of respondents disagreed with this statement.

A significant majority of respondents agree that a startup bank account should remain separate
from a personal bank account and failure to adhere to this principle has contributed to the failure
of their startups. New ventures fail largely because of inadequate financial management and
adopting appropriate principles in treating startups accounts. Managing a startup bank account is
a big responsibility towards maintaining a successful startup and the temptation of drawing from
a startup account for personal use must be avoided in order to circumvent a shortage of cash
flow.

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 Frequency Present Valid Percent Cumulative Percent
Valid Strongly agree 41 38.0 38.3 38.3
Agree 36 33.3 33.6 72.0
Disagree 18 16.7 16.8 88.8
Strongly Disagree 12 11.1 11.2 100.0
Total 107 99.1 100.0
Missing system 1 0.9
Total 108 100.0
Table 5.27: Using a unique bank account each for startup and personal use

5.3.21 Management failure to collect from credit customers:-

The results in Table 5.28 below illustrate that a total of 86.1% (35.2% disagree plus 50.9%
strongly disagree) of respondents disagreed with the statement that delay in collecting money
from customers who bought on credit contributed to their business failure, while only 13.9% of
respondents agreed and none strongly agreed with this notion.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 15 13.9 13.9 13.9
Agree 38 35.2 35.2 49.1
Disagree 55 50.9 50.9 100.0
Total 108 100.0 100.0
Table 5.28: Delays in collecting from credit customers

The credit terms should be from 30 to 90 days and that accounts which remain outstanding after
this period can cause cash flow problems in a small business. The results above imply that the
majority of startup owners/managers under survey effectively manage their debtors. It is found
that management’s delay in collecting debts is a most pertinent failure factor.

5.3.22 Lack of demand for products/services:-

Table 5.29 below indicates that a total of 72.6% (46.2% disagree plus 26.4% strongly disagree)
of respondents disagreed that a lack of demand for their products or services was a contributing

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factor to their startups failure, while 27.4% (20.8% agree plus 6.6% strongly agree) agreed with
this proposition.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 7 6.5 6.6 6.6
Agree 22 20.4 20.8 27.4
Disagree 49 45.4 46.2 73.6
Strongly Disagree 28 25.9 26.4 100.0
Total 106 98.1 100.0
Missing system 2 1.9
Total 108 100.0
Table 5.29: Lack of demand for products/services

These results imply that not many businesses failed due to a lack of consumers. This perhaps
could be the result of the high demand for diverse products in the economy while the country
produces less to support its people. However it is found that demand saturation was a major
contributing factor to the failure of startup. Literature reviewed in this study highlighted that
several startup have failed because the demand for its products or services had shrunk. This
could result because of poor product quality or obsolescence, or the market is invaded by other
businesses in the same industry with a high competitive advantage.

5.3.23 Pressure of market competition selling the same product:-

Table 5.30 below shows results on intense competition in the market as a cause of startup failure.

This table indicates that a total of 92.5% (29% disagree plus 63.5% strongly disagree) of
respondents disagreed that numerous competitors in the market caused their startup to fail, while
7.5% of respondents agreed with this statement. The results imply that there is low competitive
pressure in the study area of India.

Frequency Present Valid Percent Cumulative Percent

Valid Agree 8 7.4 7.5 7.5
Disagree 31 28.7 29.0 36.5
Strongly Disagree 68 63.0 63.5 100.0

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 Total 107 99.1 100.0
Missing system 1 0.9
Total 108 100.0
Table 5.30: Intense competition in the market

Lack of competition would remove the necessity for businesses to deliver quality products or
services or increase their innovativeness. It is found that the failure in startup to be influenced by
a low margin profit due to increased competition. This could be related to the argument that in
highly competitive market startups should be innovative and seek to offer different goods from
its competitors to be able to survive in the market. A startup that is poorly managed and does not
keep abreast of rapid technological development to retain a competitive edge, exposes itself to
the possibility of being removed from the market.

5.3.24 Lack of competitive advantage in the market:-

Table 5.31 shows that 67% (38.7% disagree plus 28.3% strongly disagree) of respondents
disagreed that lack of differentiation of their offerings from competitors’ products was a factor
which contributed to startup failure, while 33% (18.9% agree plus 14.2% strongly agree) of
respondents agreed with this proposition.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 15 13.9 14.2 14.2
Agree 20 18.5 18.9 33.0
Disagree 41 38.0 38.7 71.7
Strongly Disagree 30 27.8 28.3 100.0
Total 106 98.1 100.0
Missing system 2 1.9
Total 108 100.0
Table 5.31: Lack of differentiation of products/services from competitors

Competitive advantage is a concept which refers to products/services which are superior,

different or of better value when compared to a competitor’s offerings. However, these results
imply that lack of competitive advantage was not a failure factor and that there was no
competitive pressure. It is found that the level of innovation in India tends to be low, many

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competitors sell similar products and services and no products are considered as new. Other
studies suggest that startup which are not innovative, neglect to keep abreast of technological
development or do not provide products or services of exceptional quality, can lag behind
competitors and ultimately fail. It is found that customers demanding better products at a lesser
price was one of the major factors which contributed to business failure. In contrast, the majority
of small business owners/managers in the India did not believe that lack of competitive
advantage caused startup failure.

5.3.25 Neglecting to attend to customer complaints:-

Table 5.32 below indicates that 63.5% (38.3% agree plus 25.2% strongly agree) of respondents
agreed that negligence in attending to customers' complaints contributed to the failure of their
business, while 36.5% (10.3% disagree plus 26.2% strongly disagree) of respondents disagreed
with this statement.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 27 25 25.2 25.2
Agree 41 38.0 38.3 63.5
Disagree 11 10.2 10.3 73.8
Strongly Disagree 28 25.9 26.2 100.0
Total 107 99.1 100.0
Missing system 1 0.9
Total 108 100.0
Table 5.32: Neglecting to attend customers' complaints

The above results imply that a significant majority of respondents have disregarded complaints
from customers about poor service delivery and/or obsolete products, which appear to be of
major concern in the Indian market. It is found that incorrect handling of complaints from
customers degrade the business goodwill and lead to startup failure. Furthermore, opine that
ignoring complaints from customers can lessen demand for a product, caused by customer
dissatisfaction or loss of trust. These are critical factors which could contribute to startup failure.
A non-satisfied customer can make negative comments about a business through word of mouth
or in the social media and result in significant loss of sales.

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5.3.26 Failure to cultivate product awareness:-

Table 5.33 below shows responses on failure to cultivate product awareness as a contributing
factor to startup failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 17 15.7 15.9 15.9
Agree 12 11.1 11.2 27.1
Disagree 35 32.4 32.7 59.8
Strongly Disagree 43 39.8 40.2 100.0
Total 107 99.1 100.0
Missing system 1 0.9
Total 108 100.0
Table 5.33: Failure to cultivate product awareness as a factor of failure

Table 5.33 illustrates that a total of 72.9% (32.7% disagree plus 40.2% strongly disagree) of
respondents disagreed that failure to cultivate product awareness had contributed to their startup
failure, while 27.1% (11.2% agree plus 15.9% strongly agree) agree with this statement. This
implies that nearly three quarters of business owners/managers in the study area of India did not
experience startup failure because of poor marketing of products or services. It is found that
failure to cultivate product awareness and pay attention to cultural and environmental issues is a
significant contributing factor to startup failure. However, this differs from the above results
which indicate that only a small number of respondents believed that lack of spreading
awareness of their products caused their startups to fail. Thus, the advertisement of startup
products or services should enhance demand.

5.3.27 Theft of assets as a cause of startup failure:-

Table 5.34 below illustrates results regarding the theft of cash, goods or equipments as a cause of
failure.

Table 5.34 indicates that 74.1% (14.8% agree plus 49.3% strongly agree) of respondents agreed
that theft of their startup assets contributed to failure but 25.9% (23.1% disagree plus 2.8%
strongly disagree) disagreed with this statement. Nearly three quarters of the respondents agreed

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that their startup failed due to crime. The types of crime that startup mostly suffer are burglary
and robbery, petty theft, shoplifting, counterfeit money, credit card fraud and hijacking. It is
found that 94% of SMEs failed due to theft of equipment and raw material. This implies that
crime against a startup could cause it to fail due to the major loss of startup assets, or continuous
theft by employees can gradually deplete the business and ultimately cause total failure. A
startup that is attacked by criminals can be left with serious debt and liabilities, and if not
assisted financially by banks or government support agencies, the effects can lead to startup
failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 64 59.3 59.3 59.3
Agree 16 14.8 14.8 74.1
Disagree 25 23.1 23.1 97.2
Strongly Disagree 3 2.8 2.8 100.0
Total 108 100 100
Table 5.34: Theft of business assets as a cause of startup failure

5.3.28 Setting a lower or too expensive competitive price for goods contributed to failure:-

Table 5.35 below indicates that 71.3% (31.7% agree plus 39.6% strongly agree) of respondents
agreed that excessive bribery and corruption contributed to their startup failure, while only 28.7
(10.9% disagree plus 17.8% strongly disagree) disagreed with this statement.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 40 37.0 15.9 15.9
Agree 32 29.6 11.2 27.1
Disagree 11 32.4 32.7 59.8
Strongly Disagree 18 39.8 40.2 100.0
Total 101 99.1 100.0
Missing system 7 0.9
Total 108 100.0
Table 5.35: Bribery and corruption as a cause of startup failure

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Dishonest employees and corrupt government officials seriously threatened the well-being and
success of a business. It suggest that a country with a high level of corruption can badly impact
the business macro environment through higher cost of start-up, poor economic infrastructure,
disregard of regulatory system, increased crime, taxes and a create a very difficult environment
in which to operate and sustain a business.

5.3.29 Lack of entrepreneurship schools for skills development:-

Table 5.36 illustrates that a total of 57.7% (21.2% agree plus 36.5% strongly agree) of
respondents agreed that lack of entrepreneurial schools to gain knowledge and skills
development have contributed to their startup failure, while 42.3% (15.4% disagree plus 26.9%
strongly disagree) disagreed with this statement.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 38 35.2 36.5 36.5
Agree 22 20.4 21.2 57.7
Disagree 16 14.8 15.4 73.1
Strongly Disagree 28 25.9 26.9 100.0
Total 104 96.3 100.0
Missing system 4 3.7
Total 108 100.0
Table 5.36: Lack of startup management training and development

The failure of many Indian startups to offer tertiary education, startup management training and
development has denied the opportunity to many entrepreneurs to acquire the necessary
management skills to sustain their enterprises. Startup education would greatly increase
entrepreneurial skills, knowledge, management skills and foster an understanding of startup
systems and resource management in order to sustain an economic growth and development. It
states that confidence and skills in business management is imparted through education and
training.

5.3.30 Lack of financial support:-

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Table 5.37 shows that 69.2% (19.6% agree plus 49.5% strongly agree) of respondents agreed that
lack of financial support was a major contributing factor to their business failure. On the other
hand, 30.8% of respondents disagreed but not one participant responded that they strongly
disagreed with this statement.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 53 49.1 49.5 49.5
Agree 22 19.4 19.6 69.2
Disagree 33 30.6 30.8 100.0
Total 107 99.1 100.0
Missing system 1 0.9
Total 108 100.0
Table 5.37: Inadequate financial support as cause of failure

These findings reveal that more than two thirds of the respondents agreed that lack of financial
support had caused their startup to fail. This includes lack of support from financial institutions,
families and friends, making it impossible for entrepreneurs to sustain their startup if their own
savings are depleted and they are unable to cover operational costs any longer. It emphasize that
weak financial support to startup and barriers or restrictions in obtaining funding from financial
institutions due to poor collateral, critically impact on the success of many startups. Although
improvements have been made to credit accessibility, the results of this study show that more
financial support should be provided to small businesses in order for them to remain viable and
grow.

5.3.31 Stringent procedures in licensing a startup:-

Table 5.38 illustrates that a total of 60.9% (27.6% agree plus 33.3% strongly agree) of
respondents agreed that the stringent procedures in licensing a startup in the India contributed to
their startup failure, while 39.1% (23.8% disagree plus 15.3% strongly disagree) disagreed with
this statement.

More than half of the respondents agreed that the excessive rules and regulations in licensing
their startup had consumed all their money and contributed to their failed startup. It is found that
non- supportive government policies were a pertinent factor in the failure of startups. Startups

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face major problems in obtaining the crucial licenses and permits to start and grow their startups
in India and this poses more of a barrier than finance and infrastructure condition. To allow for
more entrepreneurial creation and development it is vital that red tape should be minimized and a
stable political environment must be created. Therefore, the findings of this study ascertained
that government regulations negatively affect startup.

Table 5.38: Stringent procedures to license a business in pre-start-up stage

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 35 32.4 33.3 33.3
Agree 29 26.9 27.6 60.9
Disagree 25 23.1 23.8 84.7
Strongly Disagree 16 14.8 15.3 100.0
Total 105 97.2 100.0
Missing system 3 2.8
Total 108 100.0

5.3.32 Scarcity of skilled people:-

Table 5.39 below illustrates the results on whether the shortage of skilled people in the research
area was a cause of startup failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 36 33.3 34.3 34.3
Agree 39 36.1 37.1 71.5
Disagree 20 18.5 19.0 90.5
Strongly Disagree 10 14.8 15.3 100.0
Total 105 97.2 100.0
Missing system 3 2.8
Total 108 100.0
Table 5.39: Scarcity of skilled people

The results in Table 5.39 above indicate that 71.5% (37.1% agree plus 34.3% strongly agree) of

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respondents agreed that scarcity of skilled people in the study area contributed to their startup
failure, while 28.5% (19% disagree plus 9.5% strongly disagree) of respondents disagree with
this statement. The shortage of skilled people in the area made it difficult to obtain qualified
employees and the scarcity of professional people with skills and knowledge to complete specific
tasks or deliver a particular service, contributed to the failure of the startup. The general
understanding of the Startup system will ultimately impact on the startup’ strategic decision and
significantly influence the business’ failure or success.

5.3.33 Unavailability of raw material in the market:-

Results in Table 5.40 below show that a total of 79.7% (35% agree plus 44.7% strongly agree)
of respondents agreed that the lack of raw material in the country contributed to the failure of
their businesses. However, 20.3% (18.4% disagree plus 1.9% strongly disagree) of respondents
disagreed with this statement.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 46 42.6 44.7 44.7
Agree 36 33.3 35.0 79.7
Disagree 19 17.6 18.4 98.1
Strongly Disagree 2 1.9 1.9 100.0
Total 103 95.4 100.0
Missing system 5 4.6
Total 108 100.0
Table 5.40: Unavailability of raw material

An overwhelming majority of respondents felt that the unavailability of raw materials in India
contributed to their startup failure. This could be as a result of the Indian economy being highly
dependent on importation and having very few own manufacturing companies. The scarcity of
raw materials causes supply risks to startup. These authors further maintain that the effect of this
raw material shortage places overload on the financial and physical resources of a startup. The
high cost of raw materials causes suppliers to lose trust. The entrepreneurs should consider
availability of raw materials when selecting a suitable primary market environment into which to
enter in the industry.

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5.3.34 Inadequate supply of water and electricity:-

Table 5.41 indicates the frequency of respondents' views regarding lack of access to water and
electricity in India.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 42 38.9 40.8 40.8
Agree 17 15.7 16.5 57.3
Disagree 34 31.5 33.0 90.3
Strongly Disagree 10 9.3 19.7 100.0
Total 103 95.4 100.0
Missing system 5 4.6
Total 108 100.0
Table 5.41: Lack of access to water and electricity

The above results show that 57.3% (16.5% agree plus 40.8% strongly agree) of respondents
agreed that inadequate supply of water and electricity in India contributed to the failure of their
startup, while 42.7% disagreed with this notion. The empirical evidence of this study reveals that
infrastructure problems, such as erratic water and electricity supply in India, have hampered and
prevented more than one half of the surveyed startups from being viable and successful. Indian
startups rely on their own generators to supply electricity for daily operations, which
significantly contributes to the high operational costs and hinders expansion, diversification and
development of private industry. Furthermore, a significant number of startup rely on their own
constructed water reservoirs for water supply.

5.3.35 Customers’ difficulties in accessing in startup facility:-

The results in Table 5.42 indicate that a total of 49.1% (27.9% agree plus 21.2% strongly agree)
of respondents agreed that inadequate infrastructure made it difficult for customers to access the
startup and purchase goods but 50.9% (26.9% disagree plus 24% strongly disagree) disagreed
with this proposition.

The poor economic conditions and infrastructural inadequacy were critical business failure
factors in India. An unsuitable startup location and forces of nature such as flood, can also

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negatively impact on startup performance. Therefore, it can be deduced that inadequate
infrastructure at a startup’ location is a contributing factor to startup failure.

Frequency Present Valid Percent Cumulative Percent

Valid Strongly agree 22 20.4 21.2 21.2
Agree 29 26.9 27.9 49.1
Disagree 28 25.9 26.9 74.0
Strongly Disagree 25 23.1 24.0 100.0
Total 104 96.3 100.0
Missing system 4 3.7
Total 108 100.0
Table 5.42: Inadequate infrastructure conditions where the startup was located

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 CHAPTER 6: CONCLUSION

In conclusion, this project has shed light on the multifaceted challenges that contribute to the
failure of startups in India. The findings underscore the need for concerted efforts from various
stakeholders to address these issues and create a more conducive environment for entrepreneurial
ventures.

The study revealed that factors such as lack of market understanding, financial mismanagement,
weak business models, leadership and team dynamics, regulatory hurdles, and limited access to
talent and resources significantly impact the success and sustainability of startups. These
challenges not only hinder individual startup growth but also impede the overall development of
the startup ecosystem in India.

However, amidst these challenges lie opportunities for innovation, collaboration, and policy
reforms. By implementing the recommendations outlined in this report, policymakers, investors,
academia, and entrepreneurs can collectively work towards nurturing a resilient startup
ecosystem in India.

Streamlining regulatory processes, simplifying compliance requirements, and introducing

investor-friendly policies can create a supportive environment for startups to thrive.
Additionally, enhancing financial literacy, investing in skill development initiatives, and
strengthening support mechanisms such as incubators and accelerators can empower
entrepreneurs and equip them with the necessary tools for success. Furthermore, fostering
collaboration between startups, corporate, academia, and government bodies can catalyze
innovation, promote resource-sharing, and create synergies that drive sustainable growth.

In essence, by addressing the root causes of startup failures and implementing strategic
interventions, India can unlock its full potential as a global hub for innovation and
entrepreneurship. Through collective action and perseverance, we can build a vibrant and
resilient startup ecosystem that not only fosters economic growth but also creates meaningful
impact for society as a whole.

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 ANNEXURE: QUESTIONNAIRE
Questionnaire to

SECTION A – DEMOGRAPHIC PROFILE.

Please indicate your response by marking with the tick () in the appropriate box, unless stated
otherwise.

Q1. Age.

Q2. Gender.

Male
Female

Q3. Nationality.

Q4. In your startup which type of ownership you are having ?

Q5. Please mark with your highest educational qualification.

Primary school
Secondary school
Diploma course
Bachelor degree
Post – graduate degree

Q6. Have you attended any short courses ?

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SECTION B – STARTUP PROFILE

Q7. How many employees do you have in your startup? Please mark with 

1 to 10
10 to 50
50 to 100

Q8. What type of startup you are having? Please mark with 

Service
Retailer
Wholesaler
Manufacturing
Or any other, specify ………………………

Q9. Have you ever had a successful startup person as a role model or a mentor?

Yes
No

Q10. Kindly specify whether your venture was accompanied by a startup plan or not?

Yes
No

Q11. If you responded affirmatively to the preceding question, indicate the extent to which
you adhered to the business plan in running the business by marking with an  .

Never
Rarely
Sometimes
Often
Always

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 SECTION C – MANAGEMENT SITUATIONS AS FAILURE FACTOR.

Q12. Please indicate your agreement with each statement regarding the managerial factors
contributing to startup failure by marking with an .

Strongly Strongly
Statements Disagree Disagree Agree Agree
(4) (3) (2) (1)
Lack of knowledge in the domain of the
startup to fail.
Lack of relevant leadership skills that took
the startup to fail.
Lack of management control.
Lack of management’s internal
communication skills.
Lack of effective communication with
external stakeholders i.e. customers,
suppliers etc.
Insufficient managerial experience.
The need for the professional advisors.
Poor pricing strategy as a cause of startup
failure.
High uncontrolled expenditure took the
startup to failure.
Failure to pay monthly lenders’ interest
Lengthy cash conversion period.
Failure to comply with tax regulations.
Lack of marketing planning.
Lack of financial plan.

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SECTION D – FINANCIAL SITUTIONS AS FAILURE FACTORS

Q13. Please indicate your agreement with each statement regarding the financial factors
contributing to startup failure by marking with an .

Strongly Strongly
Statements Disagree Disagree Agree Agree
(4) (3) (2) (1)
Lack of financial accounting skills
took the startup failure.
Failure to record business
transactions.
Failure to effectively control
business resources.
Customers fail to pay their bad
debts.
Cash flow problems at the startup
stage.
Poor management of startup bank
account.
Management failure to collect from
credit customers.

SECTION E – MARKET COMPETITION AS FAILURE FACTORS

Q14. Please indicate your agreement with each statement regarding the market
competition factors contributing to startup failure by marking with an .

Strongly Strongly
Statements Disagree Disagree Agree Agree

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 (4) (3) (2) (1)
Less demand on products or services.
Pressure of market competition selling the
same product.
Lack of competitive advantage in the
market.
Neglecting to attend to customer
complains.
Failure to cultivate product complains.
Theft of assets as a cause of startup failure.
Setting a lower or too expensive
competitive price for goods contributed to
failure.

SECTION F – ECONOMIC CONDITIONS AS FAILURE FACTOR

Q15. Please indicate your agreement with each statement regarding the market
competition factors contributing to startup failure by marking with an .

Strongly Strongly
Statements Disagree Disagree Agree Agree
(4) (3) (2) (1)
Lack of entrepreneurship schools for skills
development.
Lack of financial support.
Stringent procedures in obtaining startup
licensing.
Scarcity of skilled people.
Unavailability of raw material in the

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market.
Inadequate supply of water and electricity.
Customers’ difficulties in accessing in
startup facility.
Inadequate infrastructure conditions where
the business was located made it difficult
for consumer to buy goods.

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e
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The-Failure-of-Startups.pdf
12. https://www.setindiabiz.com/learning/why-startups-fail
13. https://m.anchor-publishing.com/document/372342
14. https://fastercapital.com/content/Identify-a-startup--key-characteristics.html#Key-
characteristics-of-a-successful-startup
15. https://www.opengrowth.com/resources/role-of-startups-in-driving-economic-growth
16. https://startuptalky.com/why-startups-fail-case-study/

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