The London Tech Sector alone is valued at £44bn, why are so many start-ups failing?

Tech Nation recently carried out the most comprehensive analysis of the UK Tech Ecosystem and reinforced the claim that the UK is the digital capital of Europe – but why are so many start-ups failing? 

David Taylor, Chief GROWer at GROW: in London said “It’s not enough to have a good product or service any more. You also need a great story with exemplary customer service.”

Take Start-up Hello. Despite being a Kickstarter hit, receiving $40.5m investment and backing from Peter Thiel, Hello recently announced on Medium, that it was likely to shut down. Perhaps a more sombre statistic is that most failed start-ups die within 20 months of their latest round of funding.

While the reasons behind the collapse of Hello are yet to be revealed publicly, it is understood that they struggled to secure further backing. CBInsights have compiled a list of 232 Start-up post-mortems with the aim of helping entrepreneurs avoid a similar fate.

Four key themes emerge:

1. Insufficient knowledge

Many start-ups have not taken the time to get to know who their target market is and should be. They don’t know how to reach them or how to talk to them. Consequently, waste budget that could be utilised to build awareness and drive revenue.

2. Poor direction

Any Start-up venture is exciting but not without challenges. To avoid total collapse, it is essential that start-ups structure their approach in line with stages of growth and execute accordingly. Above all; avoid the white noise around them.

3. Under-developed products / services

While it may be ok to inform prospective clients and investors that products / services are in development, that can only be the case for so long. Investing resources in partially building irrelevant products/services is a slow and painful demise.

4. Lack of community and culture

Community and culture aren’t just pool-tables and bean-bags in the office. It is genuine alignment across the business. It is belief in a start-ups cause inside and outside of the company. Engaged staff and clients build great businesses through advocacy.