Starting a company, any kind of company is the hardest thing to do in business. Sez me.
It’s also one of the most rewarding and fun, if you’re built for the startup experience–though not everyone is. Technology startups have their own unique challenges. There are many different ways to drive off the road, some of which I list below. Keep in mind that no startup is perfect and mistakes will be made. The future cannot be forecast and in any software or hardware technology startup you’re often flying nearly blind without a map initially, because you are trying to do something new and different.
In the end, if you are able to make it through this early phase, overcoming your mistakes may be the most satisfying part of the whole startup experience. So keep in mind that it’s almost impossible to play a perfect game. On the other hand, it’s crucial to steer clear of the mistakes which are often avoidable–because you only get some many chances to recover from errors.
Here are some of the common, often avoidable missteps to be aware of:
Too little capital
Sometimes this is unavoidable–but if you really don’t have enough capital maybe you shouldn’t start up in the first place. Activities such as software product development are notorious for going way past schedule and over budget, although the cost of developing a software product has plunged in the last 5-10 years. Most products don’t sell like a knife cutting through butter with the first modest promotional campaigns. So build a decent amount of backup money into your capital plan, because things rarely go as planned. If they do, great; you can use the money to accelerate growth. But when things don’t go well, you’ll at least give yourself a fighting chance if you’ve set aside a bit of money for a rainy day.
Don’t try to be a “Big Company” right off the bat
Some startup management teams are jealous of the resources available to their established competitors. These folks can become “Big Company Wannabes”, a classic formula for going out of business early. Don’t spend your precious time and resources on activities that don’t efficiently bring the product into the marketplace or serve to market and sell it. Period. Lavish trade show booths, company parties, expensive or large offices, administrative assistants for execs, etc., etc. Don’t hire a lot of big company people who don’t have early stage experience–they are particularly prone to the types of costly waste listed above.
No backup plan
It is a startup and you have to expect little margin for error in reaching success. But that’s no excuse for a lack of strategic planning–within the constraints of your resources. A backup plan might be something simple. For example, a software company pivoting to open source if your high-priced promotional strategy meets resistance, a service-oriented revenue strategy with a cheap or free product, utilizing a channel rather than building a full sales force, licensing your technology instead of marketing a full product to end users, etc. It depends on your circumstances, but do try to have some type of a contingency plan going in.
The “techies know everything” syndrome
This is a common malady in tech startups, because many new software and hardware tech companies are led by management heavy in experience from the engineering or software development side of the business. Usually these folks are very smart, but in some cases unable to know their own blind spots. Those blind spots often appear in marketing and sales (which every engineer and software developer knows are easy, non-complex activities). The really smart guys quickly figure out those other parts of the business besides the “tech stuff” are difficult as well, and make adjustments through education and bringing in outside experience and expertise.
The “technology is everything” syndrome
This is a corollary to the paragraph directly above. The technology and product is crucial in a tech startup, since it is usually the basis for your competitive advantage. But it’s not everything, and many a startup has failed despite great technology and an exciting new product.
No marketing budget or in-house expertise
Believe it or not, I see a lot of startup and early stage companies with little or no promotional budget. It’s insanity, but they only have enough money to get the product built, apparently thinking “if you build it they will come”. Or they have money, but put it into additional product development without adequately promoting the first product. This is nearly always a failure mode. If there is someone with marketing or sales expertise among the founders, they usually won’t allow this to happen. So secure a marketer on your founding management team, or at least find a close adviser you will feel comfortable listening to, early on.
Under-estimating time to market
This is a very common mistake. By definition, you are trying to do something new, which isn’t very forecast-able. So don’t believe your own pretty Gantt charts–garbage-in equals garbage-out when it comes to schedules. Don’t count on introducing at that big trade show, commit to costly promotional activities with no recourse, or let the developers all plan ahead to leave for that well-deserved month in Hawaii. Get the product done first. I tell you this with many painful experiences as my teacher, both personally in software and hardware companies as well as through working with through my many startup clients.
Even if you are able to get the product out on time, that doesn’t mean version one will hit the ground running. Initial products often crawl, stumble and fall at first. After all, this is your first opportunity at really accurate market research. Even if the product is right on target, finding the marketing mix that works is generally trial and error. Many products don’t find success until their second version is released; so have some money in the bank,and some emotional bandwidth in reserve for this possibility.
Introducing a “buggy” technology product
This is one of my biggest pet peeves, especially for software products. Most products aren’t fully stable when the developers think it is ready. They work on it so long and hard, that human nature wants it to be finished near the end–and dangerous shortcuts can be the result. Dedicate as many resources as you can spell to ensure a credible, third party view that the product is as stable as it can be, before the market gets the opportunity to “debug it” for you. You only get one chance to make a first impression. If the situation is bad enough, it can cost you your company.
There are my thoughts on what critical mistakes to avoid in a technology startup. I’m sure many of you have your own lessons and ideas to share. Post a comment to extend the discussion!
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