Mortality is rampant in the start-up ecosystem as much as investments and unicorns are. Most start-up ideas take off with a bang but fail to work out in the long run. These failed start-up ideas contribute to the mortality rate and ‘infant mortality rate’ of startups.
Factors that contribute to start-up mortality
- A bad set of investors can easily ruin a start-up’s growth and eventually lead to its closure.
- The pandemic and subsequent lockdowns are currently the biggest contributing factor for start-up mortality in India.
Start-Up closure rate in the year of unicorns
The pandemic years of 2020-21 are bad for many businesses but surprisingly proved to be the best years for start-up unicorns. However, the fact remains that many small businesses and SMEs in India have and are continuing to shut shop.
The closure rate for Indian start-ups, micro, small,\ and medium enterprises is projected at 59% for the year 2021 as they prepare to scale down, get sold or permanently shut shop this year. This forecast is wholly attributed to the lockdown related restrictions due to the second wave outbreak.
Closures among funded start-ups
The Indian Start-Up Ecosystem has seen close to 3200 start-ups which have received funding. Out of these funded start-ups, about 385 start-ups closed down due to various factors.
How DDD Framework reduces start-up closure rate
What’s the DDD Framework?
The Discovery-Driven-Disruption (DDD) Framework is a planning technique. It’s a management process best suited for projects with high uncertainty. The DDD framework is useful for start-ups launching new products or venturing into new markets.
How to adopt the DDD Framework?
Adopt the DDD Framework by breaking your start-up plan into small stages. At every stage, you become aware of and pin-point any assumptions your start-up has which may have proved to be risky. Next, you put these assumptions to the test at the lowest possible cost and timeframe.
How the DDD Framework reduces Closure Rate
It helps reduce closure rate by de-risking the firm. It also gives start-up founders a way to exit the business at the right time when signs of a possible failure begin to show.
The closure rate for Indian start-ups, micro, small and medium enterprises is projected at 59% for the year 2021 as they prepare to scale down, get sold, or permanently shut shop this year.
What’s in it for me?
To improve your start-up’s chance of success, go into lean mode. Lean mode is when a start-up prioritises experimentation and relies on customer feedback before diving into a large-scale launch.
Perform cost-controlled ‘disruption trials’ to protect your start-up from failure. Adopt a disciplined approach for your start-up like the DDD framework.
Even though any start-up idea almost certainly has some risk associated with it, don’t come up with an over-the-top, high cost or reckless plan. Uncertainty should not exceed its limits in business. Operate on low-risk modes like DDD and the lean mode to reduce your start-up’s ‘assumptions’ and to increase your ‘knowledge’. In turn, your business uncertainty will reduce and the possibility of closure will be minimal.