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THE INC. LIFE

Three Top Reasons Why Asian Start-ups Fail

But entrepreneurs remain undaunted

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BY Adelle Chua and Marishka Cabrera - 01 Sep 2016

PHOTO CREDIT: Getty Images

With nine out of ten start-ups destined for failure, according to Forbes, who would want to go up against such odds?

Entrepreneurs, that’s who.

Instead of getting scared, they dissect their—or others’—failures, build on them, and use those failures to create something newer and better.

Here are the three most common reasons for some failures of Asian start-ups:

1. Taking uncalculated risks

It is true that startups are supposed to be riskier than ordinary business ventures. There is such a thing, though, as uncalculated risks, especially if they concern not just day-to-day operations but the very foundations of the business.

For example, according to TechinAsia, start-up Valadoo, which offered tour packages to Indonesian destinations, focused so much on growth that it merged with another company without realizing it would be more complicated than expected. The result: it ran out of cash during the most crucial transformation phase.

Alikolo, on the other hand, conceded a majority stake to its angel investors who were even less experienced in the Indonesian retail trade business than its founder was.

Abratable and Abraresto, which handled restaurant bookings and reviews in Singapore and Indonesia, took investments in the form of debt instead of reaching out to venture capitalists. They failed to raise follow-up funding at a time when it needed to survive.

2. Failing to pivot at just the right time

Daily deal fatigue among online buyers has been observed since 2013. This threatened start-ups such as Ensogo. It, however, failed to realize this until it was too late. Says Justin Hall, principal at venture capital firm Golden Gate Ventures, “Discounts and sales can be effective as part of a broader, more long-term strategy. If an entire company’s sales are predicated on them, I think it’s a recipe for disaster.”

By the time Ensogo switched to an online marketplace, it was already too late.

3. Refusing to look beyond current trends

KotaGames is a browser-based gaming site in Singapore. It was profitable for many years, relying on feature phones for monetization. However, it did not adapt to the rapid rise in gaming through the use of smartphones. It had no choice but to fold up.

In the beginning, as well, start-up Molome took advantage of Asians’ penchant for taking selfies and posting their photos online. Molome’s value added was allowing users to spice up their photos with stickers and text.

Eventually, however, it was not able to compete with bigger names such as Instagram and Snapchat—which provided a greater range of photo service but at a higher cost. “Without funding, we could not continue our journey,” it said on its website.

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