--- title: Top 10 reasons why startups fail | SFC Capital description: As thrilling as it can be, starting a new company is not an easy task. Learn about the 10 most common mistakes entrepreneurs make to avoid them! image: https://sfccapital.com/hubfs/Imported_Blog_Media/banner_1534334688.webp --- Disclaimer Please note, company introductions through SFC Capital Ltd ('SFC') are only suitable for ‘High Net Worth Individuals’, or ‘Sophisticated Investors’ as defined by the Financial Services & Markets Act 2000 (FSMA) who are familiar with and willing to accept the high risk associated with private investments. Any investor requesting to contact a company through SFC Capital does so at his/her own risk and is solely responsible for conducting any legal, accounting or due diligence review. 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SFC Capital simply provides an introductory service where potential partners of all sorts can meet. The SFC Angel Fund is managed by SFC Capital Partners Ltd (‘SFCCP’) which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, firm reference number 736284. Information on the Fund is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell the securities mentioned herein. The SFC Angel Fund (the ‘SFC Fund’ or the ‘Fund’) is defined as an ‘unregulated collective investment scheme’ (‘UCIS’) and the promotion of a UCIS either within the UK or from the UK is severely restricted by statute. Consequently, this document is only directed at professional clients and eligible counterparties as defined by the FCA and also to persons of a kind to whom the Fund may lawfully be promoted by an authorised person by virtue of Section 238(5) of the Financial Services and Markets Act 2000 and COBS 4.12.4R. Any decision by an investor to buy shares in a fund must be made solely on the basis of the information and terms contained within the Fund’s offering memorandum. Investment in the Fund is made entirely at the investor’s own risk and professional advice should be sought in case of doubt. SFC Capital Partners Ltd (‘SFC’) is authorised and regulated by the Financial Conduct Authority (‘FCA’) in the United Kingdom, firm reference number 736284. This document is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell the securities mentioned herein. The SFC Angel Fund (the ‘SFC Fund’ or the ‘Fund’) is defined as an ‘unregulated collective investment scheme’ (‘UCIS’) and the promotion of a UCIS either within the UK or from the UK is severely restricted by statute. Consequently, this document is only directed at professional clients and eligible counterparties as defined by the FCA and also to persons of a kind to whom the Fund may lawfully be promoted by an authorised person by virtue of Section 238(5) of the Financial Services and Markets Act 2000 and COBS 4.12.4R. The SFC Angel Fund is managed by SFC Capital Partners Ltd (‘SFCCP’) which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, firm reference number 736284. Information on the Fund is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell the securities mentioned herein. The SFC Angel Fund (the ‘SFC Fund’ or the ‘Fund’) is defined as an ‘unregulated collective investment scheme’ (‘UCIS’) and the promotion of a UCIS either within the UK or from the UK is severely restricted by statute. Consequently, this document is only directed at professional clients and eligible counterparties as defined by the FCA and also to persons of a kind to whom the Fund may lawfully be promoted by an authorised person by virtue of Section 238(5) of the Financial Services and Markets Act 2000 and COBS 4.12.4R. Any decision by an investor to buy shares in a fund must be made solely on the basis of the information and terms contained within the Fund’s offering memorandum. Investment in the Fund is made entirely at the investor’s own risk and professional advice should be sought in case of doubt. The SFC Angel Fund is an SEIS/EIS fund which raises money for early-stage businesses by investing in SEIS and EIS eligible ventures with the aim of returning a profit for investors in the fund. Investment in early-stage companies involves risks such as illiquidity, lack of dividends, loss of investment and dilution. Investment in SEIS/EIS funds should be considered as part of a diversified portfolio. The availability of tax relief depends on individual circumstances and may change in the future. The availability of tax relief depends on the company invested in maintaining its SEIS/EIS qualifying status. There is no assurance that the investment objectives of any investment product will be achieved or that the strategies and methods described herein will be successful. Past performance is not necessarily a guide to future performance and the value of an investment may go down as well as up. Investors may not get back the full amount invested. No warranties or representations of any kind are expressed or implied on this website. I Accept The Terms ## FCA Mandatory Risk Warning & Risk Summary > ## Risk Warning > > **Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you are unlikely to be protected if something goes wrong.** ## Risk Summary **Estimated reading time: 2 min** Due to the potential for losses, the Financial Conduct Authority (“FCA”) considers this investment to be high risk.   What are the key risks? 1\. You could lose all the money you invest. Investments made by the SFC Angel Fund SEIS (the “Fund”) will be in shares in early-stage businesses. Investors in these shares often lose 100% of the money they invested, as many early-stage businesses fail. 2\. You are unlikely to be protected if something goes wrong Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here: [https://www.fscs.org.uk/check/investment-protection-checker/](https://sfccapital.com/fca-mandatory-risk-warning-and-risk-summary/%20https://www.fscs.org.uk/check/investment-protection-checker/)    Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here: [https://www.financial-ombudsman.org.uk/consumers](https://www.financial-ombudsman.org.uk/consumers) 3\. You won’t get your money back quickly Even if the businesses the Fund invests your money in are successful, it may take several years to get your money back. The most likely way to get your money back is if the businesses invested in by the Fund are bought by another business or list their shares on an exchange such as the London Stock Exchange. These events are not common. 4\. Don’t put all your eggs in one basket Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.  A good rule of thumb is not to invest more than 10% of your money in high-risk investments.  [https://www.fca.org.uk/investsmart/5-questions-ask-you-invest](https://www.fca.org.uk/investsmart/5-questions-ask-you-invest) 5\. The value of your investment can be reduced The percentage of each investee company that the Fund owns will decrease if the business issues more shares. This could mean that the value of your investment in each investee company reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.  These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment. 6\. S/EIS tax reliefs are not guaranteed Whilst it is the Fund's intention to invest mostly in companies qualifying under SEIS legislation, SFC cannot guarantee that all investments will qualify for S/EIS relief (or IHT relief) or, indeed, if they do initially, that they will continue to do so throughout the life of the investment. The tax advantages of investing through the Fund are therefore not guaranteed.  If you are interested in learning more about how to protect yourself, visit the FCA’s website here: [https://www.fca.org.uk/investsmart](https://www.fca.org.uk/investsmart)  Close Don’t invest unless you’re prepared to lose all the money you invest. This is a high risk investment and you are unlikely to be protected if something goes wrong. Take 2 minutes to learn more. [![SFC Logo + Title x web](https://sfccapital.com/hs-fs/hubfs/SFC%20Logo%20+%20Title%20x%20web.png?width=2000&name=SFC%20Logo%20+%20Title%20x%20web.png)](https://sfccapital.com) - [Startups](https://sfccapital.com/raise) - Investors - [SEIS Fund](https://sfccapital.com/seis-funds) - [EIS Fund](https://sfccapital.com/eis-funds) - [SEIS Explained](https://sfccapital.com/seis-explained) - [EIS Explained](https://sfccapital.com/eis-explained) - [Angel House](https://sfccapital.com/angel-house) - [Advisors](https://sfccapital.com/advisors) - [Portfolio](https://portal.sfccapital.com/portfolio) - [About Us](https://sfccapital.com/about-us) - [Blog](https://sfccapital.com/blog) - [Login](https://portal.sfccapital.com/login) # Top 10 reasons why startups fail [SFC Team](https://sfccapital.com/blog/author/sfc) 16 Aug 2018 [Startups](https://sfccapital.com/blog/tag/startups) ##### Share on - - - #### As thrilling as it can be, starting a new company is not an easy task. Learn about the 10 most common mistakes entrepreneurs make to avoid them! Starting a new company, as thrilling as it may seem, is not an easy task. Especially when investing into early-stage companies through [SEIS](https://sfccapital.com/seis-explained) or [EIS](https://sfccapital.com/eis-explained), a startup's success is not certain. Very often, entrepreneurs make some mistake that eventually leads to the downfall of their company. We spoke with the [SFC Capital](https://sfccapital.com/) team to find the most common reasons why startup businesses get in trouble and eventually fail. ##### 1. Wrong business model Having a good idea is not the only requirement for building a successful business. A business model is crucial to know where the company is. Developing a poor business model therefore, can lead to targeting the wrong audience or setting the wrong goals. The ability to adapt the business model or pivot the focus of the business in the right direction could be a lifesaver. ##### 2. Slow reaction time The key to building a successful company is being able to respond to the external changes. Through knowledge and constant monitoring, entrepreneurs are able to react quickly to the ever-changing competitors’ actions and markets. If they don’t, the business owners are very likely to make rushed, illogical, or irrational decisions that will endanger the company. ##### 3. Reluctancy to hire experts Very often, entrepreneurs are reluctant to admit they should better hire an expert to take over a part of their job. In an effort to keep costs low and close control over every aspect of the business, founders tend to overlook the fact that putting experts on a specific category or segment of the business, could lead to great success. ##### 4. Spending money too quickly No matter how appealing it may seem, entrepreneurs should withhold themselves from spending their investors' money all at once. Not only will they have nothing to rely on in financially troubled times, but also investors will lose trust in the owner and will think twice before giving them a substantial amount of money again. ##### 5. Internal conflicts Internal arguments are never fruitful for the company’s workings. Not only will individuals be distracted from the startup’s operations and vision, but they will also feel demotivated by the poor work environment. Needless to say these struggles could lead to the failure of the business in the long run. ##### 6. No market for the product It goes without saying that in order to sell a product, a business needs people that are willing to buy the product. No buyers means no cash, and no cash means no funds to continue operations. ##### 7. No focus on revenues Many entrepreneurs are focused entirely on product development and they lack commercial drive that will let them get this product in front of potential customers. Sometimes it’s a fear of selling, sometimes it’s a belief that only the perfect product can make it. A startup becomes a real business with real sales, even if the product still has to improve. ##### 8. Wrong fundraising strategy Inexperienced entrepreneurs with ill or no professional advice might make errors while looking for investment. This includes a number of things that can directly or indirectly lead to failure: raising too little or too much, setting up the wrong valuation – which can make next funding round impossible and lead to lack of [financing](https://www.wallstreetoasis.com/resources/skills/finance/mezzanine-financing)–, and attracting the wrong investors. ##### 9. Too much time spent fundraising Even though fundraising is essential for startups, entrepreneurs shouldn’t lose sight of what is most important: selling their product. In order to do so, they have to spend time developing and refining idea and generate customer awareness for their product to sell. That way, they can generate revenues and avoid competitors sweeping in and gaining market share. ##### 10. Arrogance The last but not least reason why startups fail is the arrogance of some entrepreneurs. Very often, they are too proud to seek advice from experts. In doing so, they risk taking uninformed decisions which can have a negative effect on the success of the business. Although being the founder of a startup will always come with ups and downs, taking notes of these ten ideas will put you several steps closer to building a successful company. *By Charlotte Lowel and Chanelle Allen* ## Related Articles 19 Sep 2024 [Startups](https://sfccapital.com/blog/tag/startups) ##### [SEIS Advance Assurance: Everything You Need To Know](https://sfccapital.com/blog/seis-advance-assurance) The Seed Enterprise Investment Scheme (SEIS) is a powerful source of funding that bridges the gap fo... [Read More](https://sfccapital.com/blog/seis-advance-assurance) 30 Jan 2025 [News](https://sfccapital.com/blog/tag/news) ##### [SFC 500 Roundtable: History of SFC Capital, Lessons Learned & SEIS/EIS Investing](https://sfccapital.com/blog/sfc-500-roundtable) SFC Capital is celebrating 500 portfolio companies. As part of this series, we have sat down our lea... [Read More](https://sfccapital.com/blog/sfc-500-roundtable) 14 Jul 2026 ##### [Volume with discipline: how SFC Capital became the most active seed investor in the UK](https://sfccapital.com/blog/volume-with-discipline) SFC Capital has for several years now been the most active venture capital fund in the UK. According... 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This website is intended for  professional investors, high net worth investor or certified sophisticated investors only for the purposes of the FCA's Conduct of Business Sourcebook.; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell any securities. Investment in early-stage companies involves risks such as illiquidity, lack of dividends, loss of investment and dilution. Investment in SEIS/EIS eligible companies should be considered as part of a diversified portfolio. The availability of tax relief depends on individual circumstances and may change in the future. The availability of tax relief depends on the company invested in maintaining its SEIS/EIS qualifying status. There is no assurance that the investment objectives of any investment opportunity will be achieved or that the strategies and methods described herein will be successful. The investment products cited herein may place capital at risk and therefore investors may not get back the full amount invested. Past performance is not necessarily a guide to future performance and the value of an investment may go down as well as up. Investors may not get back the full amount invested. Companies’ pitches for investment are not offers to the public and investments can only be made by members of SFC Capital. SFC Capital takes no responsibility for this information or for any recommendations or opinions made by the companies. Neither SFC Capital nor any of its employees provide any financial or tax advice in relation to the investments and investors are recommended to seek independent financial and tax advice before committing. 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