Asian Journal of Innovation and Policy

Asian Society for Innovation and Policy (아시아기술혁신학회)
권호 표지
DOI QR코드

DOI QR Code

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

  • Received : 2017.08.27
  • Accepted : 2018.02.28
  • Published : 2018.04.30
Download PDF
⟨ Previous Next ⟩

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

References

  1. Anjum, Z. (2014) Start-up Capitals: Discovering the Global Hotspots of Innovation, Random House India, Gurgaon.
  2. Bala Subrahmanya, M.H. (2015) New generation start-ups in India: what lessons can we learn from the past?, Economic and Political weekly, 50(12), 56-63.
  3. Bala Subrahmanya, M.H. (2017) How did Bangalore emerge as a global hub of tech starts in India? entrepreneurial ecosystem - evolution, structure and role, Journal of Developmental Entrepreneurship, March, 22(1),22.
  4. Basu, A. and Virick, M. (2015) Silicon Valley's Indian diaspora: networking and entrepreneurial success, South Asian Journal of Global Business Research, 4(2), 190-208. https://doi.org/10.1108/SAJGBR-04-2014-0021
  5. Brundin, E. and Gustafsson, V. (2013) Entrepreneurs' decision making under different levels of uncertainty: the role of emotions, International Journal of Entrepreneurial Behavior and Research, 19(6), 568-591. https://doi.org/10.1108/IJEBR-07-2012-0074
  6. Businessline (2017) Retrieved 02 Jul 2017 from http://www.thehindubusinessline.com/info-tech/90-startups-in-india-fail-within-5-years-ibm/article9704251.ece
  7. Carter, N.M., Gartner, W.B. and Reynolds, P.D. (1996) Exploring start-up event sequences, Journal of Business Venturing, 11(3), 151-166. https://doi.org/10.1016/0883-9026(95)00129-8
  8. Chorev, S. and Anderson, A.R. (2006) Success in Israeli high-tech start-ups; critical factors and process, Technovation, 26(2), 162-174. https://doi.org/10.1016/j.technovation.2005.06.014
  9. Cope, J. and Watts, G. (2000) Learning by doing-an exploration of experience, critical incidents and reflection in entrepreneurial learning, International Journal of Entrepreneurial Behavior and Research, 6(3), 104-124. https://doi.org/10.1108/13552550010346208
  10. Cope, J., Cave, F. and Eccles, S. (2004) Attitudes of venture capital investors towards entrepreneurs with previous business failure, Venture Capital, 6(2-3), 147-172. https://doi.org/10.1080/13691060410001675965
  11. Cope, J. (2011) Entrepreneurial learning from failure: an interpretative phenomenological analysis, Journal of Business Venturing, 26(6), 604-623. https://doi.org/10.1016/j.jbusvent.2010.06.002
  12. Cotterill, K. (2012) A comparative study of entrepreneurs' attitudes to failure in technology ventures, International Journal of Innovation Science, 4(2), 101-116. https://doi.org/10.1260/1757-2223.4.2.101
  13. DeTienne, D.R. (2010) Entrepreneurial exit as a critical component of the entrepreneurial process: theoretical development, Journal of Business Venturing, 25(2), 203-215. https://doi.org/10.1016/j.jbusvent.2008.05.004
  14. Forbes Magazine (2015) Retrieved 02 Jul 2017 from https://www.forbes.com/sites/neilPatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the-10/#16e1db096679
  15. Gartner, W., Starr, J. and Bhat, S. (1999) Predicting new venture survival: an analysis of 'anatomy of a start-up', cases from Inc. magazine, Journal of Business Venturing, 14(2), 215-232. https://doi.org/10.1016/S0883-9026(97)00063-3
  16. Gatewood, E.J., Shaver, K.G. and Gartner, W.B. (1995) A longitudinal study of cognitive factors influencing start-up behaviors and success at venture creation, Journal of Business Venturing, 10(5), 371-391. https://doi.org/10.1016/0883-9026(95)00035-7
  17. Global Entrepreneurship Monitor (2017) Global Report 2016/17, Retrieved 02 Jul 2017 from http://www.gemconsortium.org/report/49812
  18. Grant Thornton Startups Report (2016) Retrieved 02 Jul 2017 from http://www.grant_t hornton.in/globalassets/1.-member-firms/india/assets/pdfs/grant_hornton-startups_re port.pdf
  19. Jenkins, A.S., Wiklund, J. and Brundin, E. (2014) Individual responses to firm failure: appraisals, grief and the influence of prior failure experience, Journal of Business Venturing, 29(1), 17-33. https://doi.org/10.1016/j.jbusvent.2012.10.006
  20. Kakati, M. (2003) Success criteria in high-tech new ventures, Technovation, 23(5), 447-457. https://doi.org/10.1016/S0166-4972(02)00014-7
  21. Khelil, N. (2016) The many faces of entrepreneurial failure: insights from an empirical taxonomy, Journal of Business Venturing, 31(1), 72-94. https://doi.org/10.1016/j.jbusvent.2015.08.001
  22. Krishnaswamy, K.N., Iyer, S.A. and Mathirajan, M. (2010) Methodology of Management Research, New Delhi: Pearson Education.
  23. Mantere, S., Aula, P., Schildt, H. and Vaara, E. (2013) Narrative attributions of entrepreneurial failure, Journal of Business Venturing, 28(4), 459-473. https://doi.org/10.1016/j.jbusvent.2012.12.001
  24. Morgan, J. and Sisak, D. (2015) The Power of Negative Thinking: A Model of Entrepreneurship, Aspirations, and Fear of Failure, University of California, Berkeley.
  25. Pena, I. (2002) Intellectual capital and business start-up success, Journal of Intellectual Capital, 3(2), 180-198. https://doi.org/10.1108/14691930210424761
  26. Politis, D. and Gabrielsson, J. (2009) Entrepreneurs' attitudes towards failure: an experiential learning approach, International Journal of Entrepreneurial Behavior and Research, 15(4), 364-383. https://doi.org/10.1108/13552550910967921
  27. Shepherd, D.A. (2003) Learning from business failure: propositions of grief recovery for the self-employed, Academy of Management Review, 28(2), 318-328. https://doi.org/10.5465/amr.2003.9416377
  28. Shepherd, D.A., Wiklund, J. and Haynie, J.M. (2009) Moving forward: balancing the financial and emotional costs of business failure, Journal of Business Venturing, 24(2), 134-148. https://doi.org/10.1016/j.jbusvent.2007.10.002
  29. Shepherd, D.A. and Haynie, J.M. (2011) Venture failure, stigma, and impression management: a self‐verification, self‐determination view, Strategic Entrepreneurship Journal, 5(2), 178-197. https://doi.org/10.1002/sej.113
  30. Singh, S., Corner, P. and Pavlovich, K. (2007) Coping with entrepreneurial failure, Journal of Management and Organization, 13(4), 331-344. https://doi.org/10.1017/S1833367200003588
  31. Singh, S., Corner, P.D. and Pavlovich, K. (2015) Failed, not finished: a narrative approach to understanding venture failure stigmatization, Journal of Business Venturing, 30(1), 150-166. https://doi.org/10.1016/j.jbusvent.2014.07.005
  32. Startup Genome Report (2017) Retrieved 02 Jul 2017 from https://startupgenome.com/thank-you-enjoy-reading/
  33. Startup Genome Report -Why Startups Fail (2012) Retrieved 02 Jul 2017 from https://startupgenome.com/thank-you-enjoy-reading/
  34. Watson, K., Hogarth-Scott, S. and Wilson, N. (1998) Small business start-ups: success factors and support implications, International Journal of Entrepreneurial Behavior and Research, 4(3), 217-238. https://doi.org/10.1108/13552559810235510
  35. Wennberg, K., Wiklund, J., DeTienne, D.R. and Cardon, M.S. (2010) Reconceptualizing entrepreneurial exit: divergent exit routes and their drivers, Journal of Business Venturing, 25(4), 361-375. https://doi.org/10.1016/j.jbusvent.2009.01.001
  36. Zainal, Z. (2007) Case study as a research method, Jurnal Kemanusiaan, 9.

Cited by

  1. Refining the referral process: Increasing diversity for technology startups through targeted recruitment, screening and interview strategies vol.20, pp.4, 2018, https://doi.org/10.1108/shr-04-2021-0016