Introduction

The Kenyan Government has shown responsiveness to startup growth and development from legislative attempts such as the publishing of the Startup Bill 2021 to providing logistical and financial assistance through programs such as the Whitebox Program run by the Ministry of ICT and Youth Affairs and the ICT Authority in a bid to see startups get to their feet. However, the revelation is telling that many startups hardly make it to their second round of funding toward leveling up. This has left the question as to; “why do even well-funded startups fail? 

Did you know?

The failure of startups is a worldwide phenomenon. It is essential to recognize that startup failures are not unique to Kenya or any specific region. Locally, external factors such as inflation, currency fluctuations, economic downturns and lack of proper markets have seen shocks emerge on many startup operations. Internal challenges such as pressure to perform, difficulties in recruiting and retaining top talent, inadequate business models for emerging trends, failure to harness the power of data, inability to pivot at the right moment and, mismanagement of resources, among other factors, have been identified as having also hampered the growth of startups. From the above, it can be summed up that lack of funding or mismanagement of funds, retaining an efficient management team, faulty infrastructure or business model and unsuccessful marketing strategies ideally lead to business failure for startups. 

Understanding startup challenges and ways to mitigate them 

1.Financial needs

Funding can be considered from a two-prong approach in that (a) there could be adequate funding and still yet the business fails or (b) a business founder fails to secure adequate funding.  

Realistic budgets, as well as having some seed capital, no matter how small, may serve to help a business utilize investor funds and start off respectively during the startup or expansion phase. Startups are also encouraged to opt for funding through angel investing or venture capitalism. This ensures that startups have a variety of sources from which they are able to tap capital. 

2. Inadequate management practices

Many startups outsource on what they do not specialize in or have little time and expertise to successfully carry through.  

Business owners and founders need to keep up with the level of input brought about by external workforce to create a more friendly work environment so as to give bring the company more returns while ensuring that the right talents are retained. 

3. Faulty business model 

A business models is important in determining refer to the impact a business has on the projected market. For example, the well rooted business models of brands like Safaricom or Microsoft have ensured that through their well-rooted business model and the value they add value to their customers through uninterrupted network accessibility and software respectively and maintain their leading status in the corporate markets. 

Business models should be developed and backed by robust business plans to automate quality and qualitative results.  

4. Marketing mishaps

Marketing serves a crucial aspect for businesses in their startup phase wherein that having realistic projections in terms of target audience reach and sales conversion ratios remain crucial for a successful commercial campaign for a business. 

The fact that Marketing campaigns tend to be overlooked by most startups . This makes it difficult for the startups to secure financing or redirect capital from other operations to make up for the shortfall.  

Conclusion 

A drive to achieve, prosper and providing value to clientele are the most important aspects to consider when starting up a business. While a business founder may secure the funding required, the founder may still struggle to get the business running due to inadequate consideration of factors and mechanisms to mitigate the outlined challenges.  

At Netsheria International LLP, we value startups and SMEs in their growth and expansion through providing legal expertise, support and solutions to their everchanging needs. We assist budding entrepreneurs direct their passion and vision into their core business as we handle the legal stuff. We offer legal support necessary to launch and grow startup companies, protect their ideas and realize their business objectives. 

To learn more about how Netsheria can help you scale up your business, visit our website or contact us today.