Startups are and have been a contributory factor in the success of an economy. Startups boost the economy with revolutionary technology and create new industries over time. They are the way to augment the economic growth of any nation. A small startup idea can be turned into a big innovative solution that can change the future. They play a dominant role in economic growth. A market leader was once always a small startup.
BUT, this is also a fact that more than two-thirds of startups do not succeed with positive results. Many fail to deliver a positive return to investors.
Why do startups fail?
“I’ve been a professor at Harvard Business School, where I’ve led the team teaching The Entrepreneurial Manager, a required course for all our MBAs. At HBS I’ve also drawn on my research, my experiences as an angel investor, and my work on start-up boards to help create 14 electives on every aspect of launching a new venture. But could I truly teach students how to build winning start-ups if I wasn’t sure why so many were failing?”, … by TOM EISENMANN
Whenever we are to find reasons of any startup to fail, most of us cite the inadequacies of its founders—in particular, their lack of grit, industry acumen, or leadership ability.
Just blaming the founders is not a solution to this complex problem. TOM EISENMANN in his book ‘Why do startups fail’ mentioned a series of reason for downfall of a startup and then he summarised by his words, “A broad set of stakeholders, including employees, strategic partners, and investors, all can play a role in a venture’s downfall.”
After an idea does not succeed, it has to file for insolvency and bankruptcy as prescribed under the law.
Also Read – ” Why Entrepreneurship Is Valuable To Businesses “
Winding Up Process
DISSOLUTION– It means putting an end to the existence of the company. On dissolution, the company ceases to exist. Its name is struck off by the registrar from registrar of companies.
WINDING UP– It is the process whereby the life of a company is ended and its property administered for the benefit of its creditors, debtors and members.
Reasons for a company to wound up:
- inability to pay debts
- special resolution
- acting against national interests
- sick company not likely to revive
- fraudulent affairs
- just and equitable grounds
Modes of Winding up
- voluntary winding up under section 304
- winding up by tribunal under section 272
Voluntary Winding Up U/S 304:-
A company can be voluntarily wind up on the following grounds:-
- By passing an ordinary resolution in the general meeting
- when the fixed duration of the company has expired
- on happening of a certain event
- By passing a special resolution for any ground whatsoever.
Within 14 days of passing the resolution, it must be advertised in the official gazette and in some important newspaper circulating in the district where the registered office of the company is situated, In case of default in complying with the above provisions, then the company and every officer in default shall be fined up to Rs. 5000 for every day of default.
Also Read – ” Women Vs Men in entrepreneurship “
Winding Up By Tribunal U/S 272:-
Petition For Winding Up:- Petition means an application to the tribunal for winding up. As per SECTION 272, petition for winding up of the company by the tribunal can be presented by any of the following:-
- Petition by company
- Petition by creditors
- Petition by contributories
- Petition by registrar
- Petition by government authorized person
- Petition by Central or State governments
Consequences Of Winding Up
- The tribunal shall, within a period of 7 days from the date of passing of the order, send the intimation thereof to the company Liquidator and the registrar.
- The registrar shall then notify in its official gazette that such an order has been made.
- The winding up order shall be deemed to be the notice of discharge the officers, employees and workmen of the company except when the company’s business is continued for the purpose of beneficial realisation of the assets of the company.
- The powers of BOD gets terminated and now vests in the hands of Company Liquidator.
Lido Learning Files’s Case
- Lido has failed to repay debts and has fallen behind on payments to former employees.
- Employees received a full and final (F&F) settlement letter from Lido and verbal assurances from HR that their salaries would be paid by the end of June.
LIDO, an E-learning provider headquartered at Mumbai, is India’s one of the best small group tuitions platform with classes in maths, science, english and coding for students in KG to Grade 12. It uses cutting-edge animated videos and gamified learning taught by India,’s top tutors.
According to the company’s regulatory filings with the Ministry of Corporate Affairs, Lido Learning’s board of directors has passed a special resolution to file an application under Section 10 of the Insolvency and Bankruptcy Code 2016. (MCA).
Reason being told by the officials is Cash Crunch.
Also Read – ” How to Start a Low Investment Business “
Well, the number of startups is growing, competition between them is also increasing. But healthy competition is significant for startups and customers to curate the startup environment. The Role of Startups in Economic Prosperity of Developing Countries In the coming years, more and more startups are growing with modernization and creativity, which have a large potential to change the world’s economy. The government of developing countries needs to participate more in research and development to fuel the next startup boom. Well, success of a startup depends on various factors.
Indian education system needs to revamp a lot in this regard. It should lay more emphasis on creating job providers rather than job seeker. The schools should offer students mentors from the startup community along with project-based learning to spur entrepreneurial thinking and integrate technology and computer science into all parts of the set of courses. So entrepreneurship has to be taught at an early age.
Here are some enthusiastic tips to youth to lead a successful startup:-
Just do it!