Raising venture capital is the first test for most startups that have big ideas and small bank accounts. Getting that capital is a great sign for the business because it shows that investors are confident that the plan will succeed. On the other hand, it is not a sure sign that the business will prosper. There are several factors that can cause a business to fail even after it secures funding, often through no fault of the managers.
Even a small change in a country’s laws and business regulations can have a big impact on a business. The most extreme cases occur when a country bans a major product, but that is relatively rare. Increasing taxes or fees can sometimes cut into revenue and make expansion more difficult.
Private businesses can have a similar impact in a few cases. Public transportation companies sometimes ban items on their vehicles, which can reduce demand for those products. A change on that scale can be enough to destroy a new business that only offers a single product.
No business exists in a vacuum. While a few companies do manage to create an entirely new market for themselves, most face some competition and rely on superior service or other innovations to create their niche. That can be tricky because established companies benefit from brand recognition and can usually find more resources. It is fairly common for newer companies that compete with powerful brands to lose that competition.
Businesses are complicated and entrepreneurs are only human. They often make mistakes. A small mistake is a learning experience. The business might suffer a little, but it can overcome it and keep going. A bigger mistake can lead to a business failure, especially for new businesses that don’t have enough spare funds to make up for the problem.
Learning from Failure
Failed businesses provide a valuable lesson to those who study them. There is no such thing as a guarantee of success. It is a good sign when a business gets funding from venture capitalists, but the management still needs to be careful to make sure the business can succeed.