Before getting into the topic in question, we need to clarify what a failing startup means. Usually, a startup ceases to be operational or 'fails' when it cannot generate positive cash flow on its own and runs out of funds and cannot raise any more capital. This happens due to various reasons such as wrong market, lack of product-market fit, lack of timing, poor execution, bad partnerships and etc. With no funds to run or pivot the business, many founders and co-founders call it quits and shuts everything down. On the other hand, some CEOs manage to sell their entire business or get acquired. Some founders may still think of it as a failure but that's a discussion for a different day. So, what to do when your startup is on the verge of 'failing'? Let us try to learn from globally renowned startup founders.
Reflect on the reasons for failure: The first thing that entrepreneurs should do if their startup fails is to take a step back and reflect on the reasons why the business did not succeed. By understanding the reasons for failure, entrepreneurs can learn from their mistakes and make better decisions in future initiatives.
Richard Branson, the founder of Virgin Group, has spoken openly about the failures he has faced in his career. He has said that failure is a natural part of the learning process and that it is significant to learn from it in order to improve. He also shared that the failure of Virgin Cola helped him to understand the importance of branding in business.
Reach out to mentors and advisors: Entrepreneurs who are struggling with their startups should reach out to mentors and advisers who have experience in the industry. They can offer valuable insight and advice on how to overcome the challenges that the entrepreneur is facing. Additionally, they can provide support and encouragement to help the entrepreneur stay motivated.
Mark Zuckerberg, the founder of Facebook, has credited one of his mentors, Steve Jobs, with helping him navigate the early days of the company. Jobs provided Zuckerberg with valuable advice on how to build a successful company, and also introduced him to potential investors.
Oprah Winfrey, media executive, and entrepreneur, has credited her mentor, Maya Angelou, with helping her to develop her public speaking skills and become a more confident person. Oprah has said that Angelou's guidance and mentorship played a crucial role in her success.
Consider pivoting: A recent study has shown that startups that pivot once or twice times raise 2.5 times more money, have 3.6 times better user growth, and are 52 per cent less likely to scale prematurely than startups that pivot more than two times or not at all.
Pivoting means changing the direction of the business, whether that is changing the target market, product, or business model. This can be a difficult decision, but it can also be a great opportunity to discover new paths to success.
Twitter was a podcasting platform called Odeo. When Apple launched iTunes podcasting, the founders decided to pivot to a microblogging platform and eventually became one of the biggest social media platforms in the world.
Groupon began as "The Point," a platform for organising grassroots movements and campaigns. After realising that the platform was better suited for group buying deals, the company pivoted to become the daily deals website Groupon.
The company originally started as a gaming company called Tiny Speck. The team decided to pivot to enterprise communication software and became a leading messaging platform for teams.
YouTube was originally a video dating site called "Tune In Hook Up". After realising that people were using the site to share videos of all types, the company pivoted to become the video-sharing platform we know today.
One company began as Confinity, a provider of security software for handheld devices. After realising that their technology could be used for online payments, the company pivoted to become PayPal, one of the most widely used online payment systems today.
Assess the financials: Entrepreneurs should take a close look at their financials to see where they can cut costs or raise more capital. Sam Walton, the founder of Walmart, was known for his focus on cost-cutting and efficiency. He closely monitored the financial performance of his stores and used this information to make decisions about expansion and sourcing.
Ray Kroc, the founder of McDonald's, was known for his attention to detail and his focus on financials. He closely monitored the financial performance of each of his restaurants and used this information to make decisions about expansion and franchising.
Assessing financials can be a difficult process, but it is an important one for entrepreneurs to ensure that their business is financially stable and to plan for the future.
Learn from failures: Finally, entrepreneurs should learn from their failures. According to Investopedia, more than 80 per cent of the startups in USA fail after one year. Failure is part of the learning process, and entrepreneurs should take the time to reflect on what went wrong and what they can do differently next time.
Walt Disney, the founder of Disney, faced several failures throughout his career. However, he always learnt from them and used the lessons to improve his next venture. Disney's first animation studio went bankrupt, but he learnt from the failure and created a new one, which eventually became the well-known Disney Studios.
Steve Jobs, the co-founder of Apple, faced many failures throughout his career, including the failure of the Macintosh Portable. He has said that these failures helped him to learn and improve his skills, and to become one of the most successful entrepreneurs of all time.
Starting a business is a challenging and uncertain process, but entrepreneurs should not give up if their startup is going through a rough time or one of their venture fails. Failure is not the end of the road, it is just a part of the journey. Entrepreneurs who are passionate about their ideas and truly believe in it should not let a setback discourage them from pursuing their dream.
The writer is a second-year BBA student at IBA, Dhaka University.