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What are the Challenges Faced by Startups?

Innovation can single-handedly drive potential economic growth on all levels. Such innovations bloom as small ideas and nurture further through startups. 

It’s rightly quoted by Eric Ries, the Lean Startup movement creator

“Every startup has a chance to change the world, by bringing not just a new product, but an entirely new institution into existence.” 

This change further leads to the creation of new jobs and fosters innovations. In the past six years 72,993 startups generated over 7.68 lakh jobs in India. However, it’s not always rainbows for an entrepreneur. According to a study by IBM institute, 90% of startups fail in the initial five years, while 33% make it to the 10-year mark and 40% turn a profit. 

There is no particular reason for these staggering rates, but an entrepreneur must face several challenges for a startup to survive. So if you are an entrepreneur planning to make a change with your vision, read this guide to learn about various startup challenges in India.

What are the challenges faced by Startups in India?

Entrepreneurs have to deal with a long list of complex challenges; surprisingly, 63% of them have to deal with burnout. The way a startup deals with these challenges truly defines the chances of its survival. So, aspiring entrepreneurs, if you want your startup to work efficiently, let’s understand the startup’s biggest challenges in its initial years:-

1. Finding Investors 

According to a survey by NSBA, around one in four businesses could not receive proper funding, which limits business growth and is one of the startup’s biggest challenges. Additionally, it is one of the biggest startup challenges in India to find pre-seed investors, and around 77% of them rely on personal funding in the initial stages. The reason is that the investors have different preferences and a certain risk tolerance level. They won’t look at things as you do, so it’s required that you pitch your idea properly. 

2. Financial Management

CBInsights estimate that running out of personal and fund money is the second largest (approx 29%) reason for failure among startups. So financial management is a crucial topic of concern and one of the startup’s biggest challenges. Several small startups heavily rely on investors for financial back-ups. However, during cash influx, many face difficulties in financial management and bow down against the pressure. Taking advice from a reputed financial consultancy firm is suggested.  

Related Article: What are Startup KPI?

3. Understanding the needs of the customers

It is crucial to understand all the needs of a customer. The reason is that it’s estimated that around 14% of startups have failed because they disregarded the customers’ needs. The startup’s biggest challenges are understanding the customer’s needs and winning their trust. To win customers’ loyalty, the startup must aggressively implement a customer-centric working policy. This is an important factor as word-of-mouth power can give them an edge over their competitors. 

4. Cyber security

According to IBM, since the pandemic, 40% of small businesses have been targeted by cybercriminals. These cybersecurity breaches have become the startup’s biggest challenges, leading to increased costs. Furthermore, they lead to operation disruption, reputational damage, sensitive data leak, and revenue loss. 

5. Hiring the right workforce

It is estimated that around 23% of startups fail because of team issues, and this is one of the startup challenges in India and can lead to the poor working of the startup. There is a huge pool of candidates wishing to be a part of your startup, but you need to select the right candidate with similar capabilities for different roles. 

How can you overcome various startup challenges in India?

There is a long list of startup challenges in India, but an entrepreneur’s approach can make a great difference in overcoming them. Here are some tips that prove beneficial for overcoming various challenges for startups.

Redefine your Business idea

A good business idea consists of two main elements. Firstly, it is about something you are good at, and secondly, it needs to be profitable. One needs to measure their business idea against these two elements and expand it. 

Conduct Proper Research of your Competitors and the Market

Most startups spend their maximum time enhancing their product and forget about their competitors. They can survive fierce competition by doing proper research on their business counterparts, which can be done through primary research like customer questionnaires and SWOT analyses. 

Related Article: How To Raise Fund For Startups Funding?

Analyze your finances

Before executing the business plan and running errands for investments, one needs to get their finances in check. Entrepreneurs need to be aware of all the startup costs, which include the cost of physical supplies, the price of the license or permit, the cost of professional services, the cost of office space, etc. It is advisable to overestimate the costs of a startup as it will take many years to reap profits.  

Develop Customer Loyalty

It is crucial to have a network of loyal customers. So, a startup can win the trust of its customers by hearing what they have to say and having a good customer support system. Some other techniques are establishing customer loyalty programs and attending to customer complaints properly. 


The journey to a successful startup is not an easy one. A startup must fight through all the hurdles and showcase its true potential. There is no such thing as “overnight success.” A startup has to stand firm through all the twists and turns. It is rightly said that a musician is incomplete without their instruments, and the same way a startup is incomplete without funds. 

Pitching investments is difficult, so investorbase has a comprehensive solution for pitching all the investment deals. One can find answers to all the questions related to raising funds, and startups can receive insights and potential investors through the company. If you are planning to start your journey as a startup, refer to this guide to learn about various challenges and ways to overcome the startup’s biggest challenges.

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