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Why Do Startups Fail? A Case Study Based Empirical Analysis in Bangalore

Asian Journal of Innovation and Policy / Asian Journal of Innovation and Policy, (P)2287-1608; (E)2287-1616
2018, v.7 no.1, pp.79-102
https://doi.org/10.7545/ajip.2018.7.1.079
Ganesaraman Kalyanasundaram (Indian Institute of Science)

Abstract

In an entrepreneurial ecosystem, the failure rate of startups is extremely high at 90%, and every startup that fails becomes an orphan. This phenomenon leads to higher costs of failure for the entrepreneurs in the ecosystem. Failed startups have many lessons to offer to the ecosystem and offer guidance to the potential entrepreneur, and this area is not fully explored compared to the literature on successful startups. We use a case based method distinguishing a failed startup and a successful startup, studying the entrepreneurial characteristics and firm level factors which cause the failures, in the technology startup ecosystem of Bangalore. We study one of the modes of exit adopted by failed startup entrepreneurs and draw key lessons on causes that culminate in failures. We have identified that factors such as the time to minimum viable product cycle, time for revenue realization, founders’ complementary skillsets, age of founders with their domain expertise, personality type of founders, attitude towards financial independence and willingness to avail mentorship at critical stages, will decisively differentiate failed startups from the successful ones. Accordingly, implications have been derived for potential entrepreneurs for reducing the cost of failures in the entrepreneurial ecosystem.

keywords
Startups, failure, causes, exit, entrepreneurship, characteristics, firms, factors, ecosystem, bangalore, India

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Asian Journal of Innovation and Policy