The Biggest Threats to Your New Startup

One of the most positive results of the last economic recession was the revival of the entrepreneurial spirit. The scarcity of jobs and the desire to be their own bosses inspired many people to start their own small businesses. Some of them, such as Uber, gained the attention and backing of investors which helped them become wildly successful. However, according to a recent article in Forbes, an astounding 90% of startups fail.

Job Descriptions

One of the reasons that so many startups fail is due to over-specialization. Unlike large organizations, small startups have a better chance of success if everyone is cross-trained. Cross-training has a number of benefits in addition to gaining added perspective of those with a different skill set and focus. It also helps ensure that everything gets done, and that nobody ever says of a task “It’s not in my job description”. When responsibilities overlap, there is a higher degree of both accountability and participation in developing and implementing effective business processes.

Rapid Expansion

Effective business processes include planning for potentially rapid expansion, which the scalability of cloud services has simplified considerably. Expanding too quickly has been listed among the top ten reasons that regular businesses fail. However, the same rules don’t apply to startups, which often begin with little more than a great idea and a way to articulate it in a way that attracts and excites investors. Competition for investment dollars is fierce, and startups that don’t get sufficient financial backing, and quickly, are often unable to bring those ideas to fruition in the form of a marketable product or service. Worse, they sometimes see their ideas developed and patented by others.

Data Security Breaches

Because so many startups are based on brilliant ideas, developing those ideas while keeping them away from the prying eyes of potential competition is of the utmost importance. Data breaches have cost large companies millions, and have driven smaller ones out of business altogether. Your customers need to know that their personal and financial information is secure. In addition to having top of the line digital security, it’s also wise to have a data recovery system in place. Despite our vast technological progress, we humans are still fallible, and important files do get erased by mistake on occasion. If that important file happens to be your database of customer or investor contacts, it’s important that you are able to recover it.


While all businesses require a degree of stability to succeed, startups also require much more flexibility than other types of businesses. Today’s startups utilize everything technology has to offer to gather customer feedback about their potential product. While everyone would love their collected data to show nothing but high sales figures and customer satisfaction, that isn’t always the case. Data feedback may reveal that the demand for the product isn’t sufficient to justify its cost. It could also reveal a serious flaw in your business model that must be corrected before the business can move forward. Your potential customers may request changes in the product that, while possible to incorporate, may slow production. Startups have to be able to utilize the data made possible by social media and technology to full advantage, even if it means changing the product, or even starting over with a whole new approach.

Lack of a Team

One expert observer of startups noted that those with co-founders succeed more often than those with a single founder. For a startup to succeed, an idea must be accompanied by skills as well as social charisma. It’s rare to encounter all of these elements in a single individual, yet more common in a team of individuals, each bringing their own perspectives, talents, and skills to the enterprise. Because startups can fail, as well as succeed, more quickly, it’s important to have a team that can recover quickly and move on to the creation of the next project that may prove to be successful. Another benefit of co-founders is that egos are kept in check while responsibilities are shared.

The elements of a potentially successful startup are great ideas, flexibility, shared responsibility, data security and inextinguishable entrepreneurial spirit. If at first you don’t succeed, start up again!

Philip Piletic – Originally from Europe, now situated in Brisbane where I work & live. I have a strong interest in ecology and sustainability and I’m currently researching about renewable energy sources. I’d like to thank Kroll Ontrack for their resources which inspired this article.