Startup Challenges

15 Startup Challenges New Businesses Face

In the crowded marketplace of the tech industry, having the next million-dollar idea is a great beginning, but growing it into a successful business requires more effort. HBR asserts that “more than two-thirds of startups never deliver a positive return to investors.”

Why does this happen? What challenges do startups face? And if you face any of them, how can you overcome them? Let’s find out.

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15 Startup Challenges And Solutions

The foremost challenge is your idea. At the very basic level, it needs to make sense. If what you’re building is like Juicero—once known as the “greatest example of Silicon Valley stupidity”—that’s a non-starter. 

If you’ve crossed that hurdle, here are some challenges you might face.

1. Finding the product-market fit

Product-market fit is the degree to which a product or service satisfies market demand. Essentially, it asks the question, “is it a unique offering that people desperately want?”

Finding the product-market fit is a challenge to most startups because they often start with an idea. For instance, let’s say you have an idea for a new social network. You need to know:

  • Who needs it?
  • What is unique about it?
  • Who is going to miss it if it’s not developed?
  • Will they pay for it?

Not being able to answer these questions can lead to not knowing where the market is, which can ultimately lead to failure.

To find your product market fit, try the following.

Identify target audience

Define your target customer and understand their needs using surveys, interviews, and observational analysis.

Crystallize your value proposition

Define what problem of your customers—that they desperately need to be resolved—are you solving.

Build and test MVP

Build a minimum viable product and test it with potential customers. You can also conduct A/B tests to compare different versions of your product. Then, iterate and improve the product-market fit. 

2. Securing funding 

“In the third quarter of 2023, 311,000 new businesses were formed in the United States,” finds Statista. With the pandemic, war, and the economic downturn, venture capitalists are also being cautious with their money. 

To overcome this challenge, you need to stand out from the crowd.

Focus on your differentiation

Build your pitch presentations around showing how you are better than other products/solutions in the market.

Optimize financials

Audit your financials. Eliminate unnecessary expenses and demonstrate ROI on the rest. Present a clear view of what the investor can expect as returns for the valuation you’re presenting.

Diversify funding sources

Explore alternative funding sources like angel investors, government grants, incubators, accelerators, crowdfunding, or partnerships. 

3. Unrealistic expectations

You’re a founder. You’re bound to be ambitious and positive about the future. But that outlook can be unrealistic. For instance, you might expect a new employee to deliver results immediately. Or your sales team to 10x sales each year. 

These are unrealistic expectations. Having them can set you and your team up for failure. It can lead to disappointment, frustration, and even disillusionment. 

Validate your expectations

Speak to a senior, partner, mentor or coach to validate your expectations. Ask what they would expect and calibrate it with yours. 

Set realistic goals

Use the SMART framework to set business goals that are realistic and achievable for your team. Setting a big fat hairy goal is great, but don’t make it so big that your teams resign to failure even before trying. Using OKR software for startups can also be helpful.

ClickUp Dashboard
Create, achieve, and track all your OKRs across teams and departments in one place with ClickUp

Seek feedback

Sometimes you only know that an expectation is unreasonable post-facto. When something falls below expectations, seek feedback. Listen to the reasons for failure and adjust your expectations accordingly.

4. Financial management

Improper budgeting, outdated accounting systems, failure to plan for cash flow, and band-aid solutions are par for the course in the early stages. As you grow/scale, however, this challenge can turn into a full-blown catastrophe.

Avoid that with the following solutions.

Develop a financial plan

Outline short-term and long-term goals, including revenue projections, expense, and detailed cash flow forecasting. This creates visibility and helps you stay on top of things.

Get the right team

Hire bookkeepers, financial analysts, tax experts, auditors, and advisors to ensure your financial management is top-notch. You don’t need to hire them all full-time—freelancers or consultants would do too.

Set up the right tools

As you scale, you can’t manually do your accounts. Set up automated accounting, payment processing, monitoring, etc. 

5. Hiring

Hiring the right people for the right job at the right compensation is a challenge for the biggest of enterprises, let alone startups. Talent is limited. Today’s employees are demanding. And you might need to stretch your budget too.

In fact, several of the best people are still deciding between choosing a startup or a corporate job. Address the common challenges around your recruitment process with a systematic approach. 

Offer equity

This is something most startups do as a way to compensate for lower compensation packages. It is attractive to top talent as it enables wealth creation in the long term. 

Build a positive work culture

“Nearly all Gen Zs and millennials want purpose-driven work, and they are not afraid to turn down work that doesn’t align with their values,” finds Deloitte. Have a solid foundation of values, beliefs, and ethics. Document and publicize the work culture.

Be inclusive and flexible

Offer flexibility and focus firmly on employee well-being. Go beyond one-size-fits-all policies and learn what the needs of each individual are. Be inclusive of diverse people and their needs.

6. Regulatory issues

Depending on the industry and geography you operate in, you might be subject to dozens of regulatory and compliance requirements. For instance, fintech or healthcare might have more regulatory considerations than IT.

Don’t wait for these to become a challenge. Get ahead of the situation with the following.

Study the landscape

Either by yourself or with the help of advisors and mentors, study the landscape of regulations applicable to you. Also, understand the ethical obligations. For instance, legally, you might be required to pay the national minimum wage, but ethically, you might be expected to pay a national living wage.

Set up compliance teams

Put together a powerful team of lawyers and legal experts to manage your regulatory compliance. If you’re not yet ready to onboard a swanky law firm, start small. But get help as soon as possible.

7. Fierce competition

There are new startups mushrooming across the globe every single day. Almost all categories are crowded. For instance, the content creator software category has 296 listings on G2.

While you might think you have a great idea and unique proposition, there is most probably already an app for that. Compete effectively with the following solutions.

Differentiate your startup

As much as possible, identify the factors that make you stand out and harp on it. This could be security, pricing models, technology capabilities, customer service, or anything else. Find why you’re great and talk about it. 

Use storytelling

Stories help connect. They help people visualize a future that they might not have imagined. Use storytelling in all your communications. Create reports that talk about the product’s importance in the market. Write case studies highlighting how customers used your product and the results they have seen. Get testimonials and sound bytes from clients. 

8. Poor team management

Let’s be fair here. A startup is a dynamic environment with a lot of trial and error. Chaos is the norm. Those who don’t flourish in chaos are probably not best suited for the environment.

Even when this is understood, managers fail at their jobs. They struggle in emphasizing the purpose, showing the future, eliminating roadblocks, and instilling a sense of pride among their teams.

If you’re facing these problems, try the following.

Define roles and responsibilities

Use a commonly understood framework like OKR or KPIs to define the roles and responsibilities of each individual on the team. Show them what their goals are and make them visible.


Employees lose purpose when they feel distant from the leadership team. So, regularly communicate with your teams. Send weekly recap emails, conduct town halls, or write notes about your interactions with customers. Keep the connection alive.

Mentor your managers

Not everyone is born to be a manager. So, don’t expect them to be. For first time managers, offer playbooks on how to be a good manager. For experienced folks, reiterate your startup’s values and what it means to be a manager here.

9. Creating brand awareness 

As a startup, you often start from scratch, which means no one knows you, they can’t yet trust you, so they won’t buy from you. You might not have the big budgets of established enterprises to launch large-scale advertising campaigns or use a brand ambassador.

So, you need to get creative to get brand recognition.

Create content

Create powerful, differentiated content, publish, and distribute widely. Through your content, educate the prospect and create value in their lives so they take notice and remember you.

For instance, if you’re creating an expense management platform, you can create content about using credit cards, managing debt, finding great deals, using a budget, etc., which don’t directly sell your product, but build trust with the audience about your brand.

Build on existing credibility

Your CEO might be well-connected. Your product lead might be a heavy Reddit user. Your marketing head might be big on LinkedIn. Your new content lead might have an existing podcast. 

Look for individuals in your organization who have some audience and leverage these limited resources to create extraordinary brand awareness.

10. Known and unknown risks

Every business needs to face a number of risks throughout the course of its life. Some risks might be expected, like difficulty in getting the next round of funding or a cybersecurity vulnerability.

Other risks can be completely unknown, like a pandemic, a change in regulation, or a war. As a business owner, you need to prepare for them anyway.

Regularly assess potential risks

Use tools like SWOT analysis, Monte Carlo simulation, the five whys, etc. to regularly assess potential risks. Within each department, you might conduct specific audits like vulnerability assessment and penetration testing (VAPT) for cybersecurity risks.

Design risk mitigation strategies

Know what you’d do when a risk materializes. For instance, have a plan for your response to a data breach. Or diversify funding sources to cushion yourself against an investor backing out.

11. Founder-centrality

One of the biggest challenges of founder-led startups is that the founder takes a disproportionate role, hindering the growth of the organization. 

It is very common for a technologist founder to create a fantastic product that doesn’t sell because they didn’t listen to the market. Or a visionary leader being ambitious and demanding that others find them difficult to work with. 

A startup needs to shed the identity of being a founder’s business to scale and succeed. To enable that, the founder-leader must:

Build a team

Don’t try to do everything yourself. Build a team of specialists and delegate. Even if it feels tedious in the beginning, it’ll pay off in the long run.

Be open to feedback

Actively listen to every stakeholder, including users, customers, employees, contractors, investors, and peers. While you might not take all their input into account in your decisions, be open to criticism, disagreement, and debate.

Take regular breaks

Founder-CEOs often think their business will spontaneously combust if they take a vacation. Whether it’s true or not, it’s toxic. So, once you set up a team and stabilize operations (typically within 6-12 months of starting up), take breaks. Come back to see your business grow without you.

12. Rigidity of opinion and action

Successful startups are built by opinionated people. They are those who see something wrong with the world and have an idea to change it. As a corollary to this, they also end up being top rigid with their point of view.

This becomes a challenge as the customer needs and markets evolve. The founder-CTO might be highly opinionated about how a product should be, but if the customer isn’t resonating with that, change is necessary.

When faced with this challenge, try the following.

Step away for an outsider’s view

Take yourself out of the product and ask, “if someone else had built this, what would I feel?” Step into the customer’s shoes and see why they aren’t resonating with your approach. It also helps to speak to some of them to see what’s going on.

Speak to a mentor/coach

A good mentor/coach will help you see the other person’s perspective. They can talk you through your inflexibility without judgment, giving you a safe space to accept your mistakes.

13. Not being on startup mode

Let us clarify. Every startup needs to grow, scale, and sell or IPO. However, this doesn’t mean that they let themselves get pulled into the problems of large enterprises like departmental silos, leaders’ egos, politics etc.

The ability of a startup to innovate and deliver customer value depends on them being curious, agile, competitive, and aspirational, i.e., startup mode. To avoid sailing away from this, consider the following.

Be watchful

Loss of the startup attitude often goes unnoticed before it’s too late. So, as a leader, keep an eye out. Look for conversations that imply complacency or ordinariness. Listen to how people are feeling.

Take time to review

Once a product is built and taken to market, don’t stop your research and development. Set aside time and budgets to conduct market research, collect customer feedback, try competitor products, and incorporate the latest technology.

Nurture your culture

Most startups leave this until it’s too late. Even before your first hire, decide what kind of organization you want to build. Outline your values and expected behaviors. Lead by example and encourage your leadership team to do so too. 

If you see your culture changing—which is very likely to happen when you hire more people—take responsibility for bringing it back on track. This could end up being your competitive advantage.

14. Decision-making by committee

Small startup teams make it easy for everyone to be involved in every decision. Like the design of the logo or the content on the website. It is not uncommon for startups to conduct workshops to decide which image needs to go on the hero banner of the website’s home page.

This process of making every decision by committee is a challenge because:

  • It takes too much time
  • It demands building consensus on everything, even if trivial, like where to go for team lunch
  • It places more importance on opinion rather than data

Avoid decision-making by committee with the following tactics.

Only include the people involved

If you’re making decisions about the brand design, include the designer, marketing head, and perhaps the product lead. Don’t include HR, finance, etc. just because they are ‘important members of the team.’

Prioritize data

While making decisions, do what the data suggests. If you don’t have the data you need, conduct experiments, like A/B testing, to acquire it. Encourage everyone with an opinion to bring data to back it up.

15. Failure

The most obvious challenge any startup faces is the risk of failure. In short, startups fail. This needn’t be the dramatic shutters coming down. It can be small, everyday things like hiring the wrong CTO, investing too much in an event, an ineffective marketing campaign, etc. 

Expect these failures and build systems to get over them quickly.

Set up retrospectives

When something fails, don’t ignore it. Thoroughly and openly discuss what happened, why, and what you could have done differently. Also, measure the impact of the failure. 

Take ownership

In the tech world, failures are normal. If you can, fail fast. Even otherwise, take ownership and fix it. Don’t dwell too much on the loss. Focus on the lessons learned and apply them to the next iteration.

Know when to call it quits

This is hard, but it’s necessary. Startup founders are often swayed by the sunk cost fallacy. Irrespective of how much you’ve invested in it, if abandoning the project is the best course of action, be prepared to take it.

These fifteen challenges are just the start. Depending on your industry, customer persona, employees, geography, etc. you are likely to face myriad challenges every single day. To overcome these challenges, you need the right toolkit. Let’s see what that might look like.

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Tools For Dealing With Common Startup Challenges

Most of the above problems can be overcome with good communication and a transparent organization. For instance, you can resist having unrealistic expectations by articulating them clearly to begin with. When you do, you’re likely to be cut off right away because what you’re asking is unreasonable.

So, before you do anything else in your organization, set up a robust virtual workspace like ClickUp with a focus on communication, collaboration, and transparency. 

Build a checklist to begin right

A journey well begun is a journey half done. So, if you’re venturing into a new business, make a checklist of activities, such as opportunity assessment, financial analysis, and launch plan.

ClickUp’s Business Startup Checklist has everything you need to get started. Customize it to suit your business and sail through each step.

Business startup checklist
Organize everything you need for your new business in one place with ClickUp’s business startup checklist

Crystallize your idea

Every business starts with an idea, but that doesn’t mean the idea remains the same till the end. A good founder knows to take their understanding of the market gap and evolve their idea to fit it right.

The ClickUp Startup Canvas Whiteboard is a great place to have these discussions. It helps you identify the value proposition, revenue model, segmentation, etc., so you crystallize your idea and build a successful product.

Startup Canvas Whiteboard Template by ClickUp
Startup Canvas Whiteboard Template by ClickUp

Manage operations well

As a company of three people in a garage, you might not see the need for a project management software for your startup. But that’s where you’re wrong. Using a tool right from the start helps you capture knowledge that can be invaluable to your teams in the future.

It also helps collect data about how long a task takes, who can do what, what blockers arise, etc. 

A comprehensive solution like ClickUp for startups can help manage all your workflows and pipelines in a single space. The good news is: ClickUp is simple and easy for a small team but powerful enough to scale for enterprise-grade needs!

ClickUp Teams Startup 
Grow and manage your startup with ClickUp Startup management software

If you’re new to the startup world, dear founder, here are several hand-picked Project management templates that can help standardize processes, manage risks and incorporate best practices.

ClickUp Project Management Portfolio Template
Project Management Template by ClickUp

Handle the miscellany

There are dozens of tools that can be extremely helpful for every startup. You might not need them all, but it’s good to check them out. Here are some of the best tools for startups


Remote teams need to collaborate asynchronously, effectively and contextually. Email or Slack can only do so much on this front.

A good collaboration software is an armor of tools. ClickUp includes whiteboards, mind maps, chat view, nested comments, real-time collaboration on documents, and more.

Customer relationship management

CRMs for startups help in managing effective marketing and sales pipelines. It helps ensure sales tasks are optimized and prioritized correctly. It also plays a critical role in bringing together the growth team—i.e., sales, marketing, and customer success.

Marketing operations

Startup marketing tools help in managing multiple social media accounts, email marketing, content management, and marketing analytics. ClickUp for marketing can help brainstorm, plan and execute campaigns and keep track of metrics.

ClickUp’s Marketing Project Management software
Boost your marketing team’s efficiency with ClickUp’s marketing project management software

AI tools

There is a lot of buzz around AI today. Especially for startups, AI can help automate and accelerate several key processes. Content creation, product documentation, etc. can be transformed with a lean team and some AI tools for startups.

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Startup and Scale Up With ClickUp

First off, congratulations on your startup! By starting the business, you’ve overcome your first challenge. 

However, you’ve embarked on an adventurous startup journey full of challenges. This could be internal, like your own insecurities, reluctance, or biases. It could also be external, like competition, talent acquisition, etc.

As a founder, you need the right toolkit to face these challenges head-on. ClickUp’s workplace management platform is all that and more.

If you’re struggling with internal challenges, use ClickUp Docs to journal or the ClickUp Whiteboard to brainstorm. For external challenges, use the wide array of tools to understand, ideate, and execute mitigation strategies.

From helping you craft a strategic vision and business plan to assembling your team and managing products, ClickUp, as your trusty sidekick, can greatly boost your performance. 

Get your startup off the ground with ClickUp today!

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