Startup Mistakes by Software and Hardware Tech Companies

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 will list below. Keep in mind that no startup company is perfect and startup mistakes will be made. The future cannot be seen and in any software or hardware technology startup you’re often initially flying nearly blind without a map, because you are usually trying to do something new and different.

In the end, if you are able to make it through this early phase, overcoming your startup 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 mistakes which are often avoidable–because you only get so many chances to recover from errors.

Here are some of the common, often avoidable startup mistakes to be aware of:

Startup Mistakes: Too little capital

Sometimes this is unavoidable–but if you really don’t have enough capital to get the job done, 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 SaaS or a traditionally licensed software product has plunged in the last 5-10 years. And unfortunately, 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. Over-the-top trade show booths, lavish company parties, expensive or large offices, administrative assistants for execs, etc., etc. Be careful of hiring a lot of big company people who don’t have early stage experience–they are particularly prone to the types of costly waste, which your startup budget can’t afford.

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; heavily utilizing channels 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 see 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 appropriate adjustments to overcome their startup mistakes 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”. A common symptom of this is after all the money is spent on product development, the founders have no promotion at all and look to hire “commission-only” sales reps. 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 tech startup mistake. By definition in a tech startup, 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 my many startup clients.

Under-estimating time-to-success

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 well is generally trial and error. Many products don’t find success until their second or even third version is released; so have some money in the bank, as well as 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 of the “schedule” — and dangerous shortcuts can be the result. Dedicate as many resources as you can muster to ensure a credible, third party evaluation 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 some critical startup mistakes to avoid in a technology company. 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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