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Emerging Trends of Failing Start-Ups

Things don’t always go the way we would like or imagine. We all know this and are somewhat prepared for this harsh reality. Start-ups are not immune to this truth. Due to the unfolding challenges created by COVID-19, what we previously knew to be difficult has now become nearly unsurmountable. Nearly! We should never underestimate the power of entrepreneurial drive.

Signs of the Times

Start-ups are failing. But as a start-up entrepreneur, you knew getting into business that the road to start-up success was not going to be a smooth one—and the road certainly is bumpy nowadays, to say the least. Being flexible, keeping up to date on trends, rolling with the socioeconomic punches, adapting and evolving were always going to be necessary to survive. In fact, previous figures told us that 90 per cent of start-ups fail.

These statements would all be true even if the pandemic had never occurred.

Factor in a global pandemic and the failure rate has risen to 92 per cent.

“If it bleeds, it leads” has long been the motto of many a news broadcast. As a result, the news has informed us of larger companies that have become so-called “coronavirus corporate casualties.” Huge names—including JC Penney, Pier 1 Imports, and GNC, as well as JP Morgan, Wells Fargo, and Sears—have suffered huge financial losses.

We don’t always hear of the start-ups that have also fallen by the wayside.

Statistic Canada reported that Canadian corporations posted an 8 per cent decline in net income before taxes in their 2020 second quarter—a decrease of $4.5 billion to $52.3 billion.

Business as Unusual: Make Lemonade

The pandemic has reshaped how businesses run and how leaders lead. Being able to adapt and pivot quickly has never been more important, as displayed by these six start-ups.

New business normal

Realizing its technology could help generate respirator connectors and PPE, 3D printing company 3YOURMIND not only aided those on the front lines but also enabled the company to future-proof its business.

Be flexible with your business model

A global leader in precision medicine, Avellino adapted its business model during the crisis to fill a gap in the testing market for COVID-19.

Take advantage of your fortes

Frontline workers were overworked—AI-powered Contextere was able to ease that burden through the deployment of artificial intelligence.

Keep connected

Financial services and blockchain company Diginex rapidly updated its technology solutions to switch from in-person communicating to doing so virtually/remotely.

Learn before you leap

When the pandemic struck, Andreas Kunze—founder and CEO of AI/IoT tech start-up, KONUX—reflected on two questions: In a scenario where our market collapsed, what assumptions would I still not challenge? What’s the core of what we do?

“In times of great change,” said Kunze, “we need to learn about the market, customer, product and people impact as fast and as much as we can.”

Think even further outside the box

Livinguard, a maker of face masks and other PPE, scaled up its production while ensuring its staff could work safely and transport the necessary products—especially difficult due to the challenges faced from the substantial decreases in air and ground travel.

The great unwinding

Martin Pichinson, head of Sherwood Partners—an advisory fi rm based in Silicon Valley—referred to what was taking place with start-ups as “the great unwinding”. Pichinson went on to say that, in recent weeks, his firm had taken three or four times the number of calls pertaining to failing start-ups than he had ever witnessed.

Venbridge’s 3 Reasons Start-Ups in Canada Fail, And The 3 Reasons They Succeed (published June 25, 2019) lists the main reasons for failure to be:

• Not the right team

• No market fit

• Not enough cash

Their top reasons for success:

• A strong founding team

• Effective utilization of their network

• Efficient use of funds

These may sound like common sense, but they are timeless and invaluable trends/reminders—regardless of the time, country, or situation.

Trends—Like Numbers—Don’t Lie (Much)

The current failure rate is 92 per cent. That’s enough to make even the hardiest of us pale. But life is all about variables—what’s 100 per cent true one day may not carry the same mathematical perfection the next day.

Basically, start-ups consist of two key principles:

• Innovation

• Growth

Canada has two entries (three cities) on Startup Genome’s worldwide list of top cities to launch a tech start-up: Toronto-Waterloo ranked 18th and Vancouver ranked 25th. However, Startup Blink has Toronto ranked 11th and Vancouver 19th.

Peter Campbell | Contributing Writer

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