Startups are all about launching new business ideas and seeing them grow over the years.
But for many new entrepreneurs, especially in developing nations, the dream is short-lived. They end up abandoning their ideas and become wadge earners or offer their professional services to a successful company
New businesses do not grow much in such nations because of the lack of a startup ecosystem to support aspirant entrepreneurs.
The ecosystem is about putting in place the much-needed infrastructure and resources for healthy startup growth. It includes providing financial support, platforms to share ideas, and mentor developments.
In the modern business world, a supportive startup ecosystem is crucial to the economy's overall growth. This is because more innovative business ideas and their successful implementation create more jobs. Consequently, unemployed people start earning and contributing toward developing a nation's economy.
The world of startups is expanding fast , with reports saying that 137,000 startups launched every day across the globe. That is on top of over 150 million startups already dotting the world today.
But how many startups survive out of the thousands of them launched? The answer is that most of them close early, and others barely survive.
Moreover, most startups fail in nations where their ecosystem for startups is still underdeveloped. However, developed countries also have their own issues in setting up and growing new businesses.
Major Challenges Faced by Startups
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Vicious Competition
Thousands of aspiring startups enter the business world with aggressive marketing strategies every year. But unfortunately, most of them fail due to their inability to deal with fierce competition.
Consequently, fifty percent of startups close within the first four years, as per different surveys.
To beat the competition in the B2B and B2C environment, startups must develop innovative offline and digital marketing tactics.
They should analyze competitors’ strengths, weaknesses, opportunities, and threats. It would be suitable for startups to foray into their niche only after thorough market research to deal with competition.
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Expectations Too High
One of the major reasons many startups fail to make their mark is that they become too ambitious and want to chew more than they can bite. After initial success, they typically set up high business goals but get frustrated when achieving very little due to fierce competition.
Startups need to control their aspirations by setting realistic small chunks of goals. With this strategy, they can do well despite their limited resources regarding finances and skilled people.
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Hiring and Retaining the Best Talent
No startup can survive in a hard-fought business world without first hiring the best suitable professionals and retaining them. After all, conducting a business is teamwork with the right minds making and executing strategies.
But where and how to find the right employees with desirable skills is not easy since many companies are competing to hire them. Moreover, this competition makes retaining those professionals challenging as they might migrate to the greener pastures anytime.
So, startups should entice suitable candidates with attractive salaries, perks, and incentives to retain them. Also, create a work culture to keep them engaged and motivated.
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Finding the Right Partners
Another challenge for startups is to find a dependable and trustworthy co-founder. A co-founder or partner who brings financial support to the startup also shares the same level of worries, risks, and rewards about running the new company.
But finding such collaboration from a reliable person is not easy. Startups should look for financially strong organizations with a good reputation in the market. Fortunately, many websites and meet groups help startups meet potential co-founders these days.
Offline venues such as startup events, conferences, and camps are also places to scan for partner investors interested in putting money on startups.
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Managing Finances
Since most startups have minimal experience in financial management, chances are they will ruin their limited resources. Consequently, many newly set up companies face a cash shortage to run their daily operations.
The solution for keeping good financial health is to hire a financial consultancy to manage monetary resources. Such firms help startups in many ways, including budgeting and making financial strategies. They are also instrumental in fundraising.
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Dealing With Online Security Threats
Saving their valuable company information from cybercriminals is not easy for startups having limited security-related resources.
To meet cyber-attack challenges, startups must implement a data security policy from day one. The policy should include setting hardware standards for all employees, setting a strong password policy, and keeping offsite data and critical systems backups.
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Winning Customers’ Trust
While every business wishes to win customers’ trust, startups find it challenging. People do not usually trust a new business idea easily unless and until they are doubly sure about it. That is why many startups struggle to build a solid customer base.
To build trust, startups should provide top-notch honest, and transparent customer service, be reachable, share positive testimonials and reviews.
Startups should ask for feedback and act on them and always be reachable. Even an impressive business logo can help build trust by conveying a message to potential customers.
Startups with limited resources can use these measures will give a startup over their competitors.
Problems in the Startup Ecosystem
Now that you know the challenges, note the inherent problems pertinent to the startup ecosystem.
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The Mentality to Avoid Taking Risks
Many countries are still lacking in the ecosystem of taking financial risks, which breaks the spirit of venturing into new business fields.
A key reason for that mentality is the lack of education and the right entrepreneurial attitude. But strategically focusing on these two areas can ultimately help improve the ecosystem.
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Cultural Hindrances
Some cultures perceive entrepreneurship as unworthy. Such social culture comes in varied forms, including masculinity, power distance, avoiding uncertainty, and individualism.
However, it can be corrected by changing the negative cultural values and behavior into a positive mindset.
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Lack of Financial Support
Startups face a big problem of not finding investors quickly, which leads the startup ecosystem underperforming.
This is happening particularly during the annoying COVID crisis. The newly started companies find it challenging to find investors. Many reasons, such as financial insecurity and lack of family or friends support, are why startups face financial problems.
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Inadequate Government Support
A fragile startup ecosystem is one lacking in support from the government. There are no or little incentives for newly established businesses.
They do not get funds at low-interest rates and have no tax benefits. There is also minimal support regarding inflation, unemployment, and welfare which further worsens the prospects of startup growth.
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Bureaucratic Hurdles
In many countries, bureaucratic hurdles slow down the growth of the startup ecosystem.
Startups have to go through excessive paperwork and uncertainty over getting a project approved. Most aspirants have no clue how to navigate through a wide range of hurdles.
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Lack of Startup Infrastructure
Startups can survive and grow only when there is a good support network. Such infrastructure includes co-working spaces, educational institutions, mentoring, fast internet, and funding organizations.
Most importantly, many online and offline places should be where aspiring entrepreneurs can pitch their new ideas. In addition, they should be able to connect with like-minded people quickly.
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Lack of Inspirational Stories
Another problem for a stunted startup ecosystem growth is the lack of stories to motivate young people to realize their entrepreneurial dreams.
We all follow the footprints of our elders, who may be our parents or leaders we idealize. If a startup ecosystem lacks such success stories, it often results in a lack of enthusiasm for new ideas.
Inspiring stories are amongst the most effective ingredients in bringing talented entrepreneurs into the ecosystem. But this happens when there are systems in the society to discuss and learn from others' experiences. Unfortunately, many countries are still now aware of the power of inspirational stories that fire imagination.
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Too Low or High of a Cost of Living
Cost of living also is a significant factor in determining the health of a startup ecosystem. If the cost is meager, it will encourage business consultants and freelancers to work at higher wages overseas. That, in turn, will eliminate the need to be an entrepreneur and take risks.
Similarly, the high cost of living also proves to be detrimental in advancing the cause of startups as very few entrepreneurs can pay for very high wedges and other expenses. Countries like Norway are facing this problem.
So, these are the hindrances that a startup has to face and they should be prepared to fight it out for survival and growth.
Conclusion
The startup ecosystem in different countries has its own set of challenges and problems due to cultural and bureaucratic hurdles.
Major challenges include vicious competition, finding the right business partners, winning customers’ faith, managing finance. Amongst the problems, the startups confront the most with lack of cultural and financial support, an anti-business mentality, and the absence of governmental support.