So what keeps you up at night? If you’re a tech startup CEO or founder, the list of possibilities is long. I often say starting a software or hardware company is barely a rational act. The deck is stacked against tech startups. And the odds of success are almost invariably quite long. But some aspects of a startup are more critical for survival and ultimate success than others.
Startup Tech CEOs Often Feel Trapped
Let’s take a look at my personal top 7 favorite questions that should be considered carefully to improve the dismal odds of success:
Is my product idea good enough?
This is often at the root of tech startup success — or failure. Almost everything isn’t in your favor in a technology startup. Especially when you are the “new kid on the block” in a market segment. The one thing that a SaaS, mobile software, or hardware startup company usually has going for it is product differentiation. If you don’t have it, or it’s not quite enough to take market share from incumbents, then you are probably headed toward extinction.
Occasionally there is time for a small pivot or two. This can help to gain enough differentiation to survive or thrive. But the clock ticks pretty fast on most startups. So the thing to spend most of your time on in the early days is making sure that your target market will view your offering as a “killer product”. If they don’t, much of what follows on this list may not matter much.
Did I pick the right founding team?
So let’s say you’ve got the product right. And have significant differentiation — at least on paper. This can allow you to establish the company as a going concern in your market segment. But many other things can trip tech startups on the road to success. High on that list are your co-founders and other early senior management team members. Did you assemble a team with the right, complementary skill sets for your particular situation? With the right work ethic? Can everyone get along? I’ve seen early-stage companies with great products implode. Often because of internal dysfunction. Or they were missing key skills on the management team. And either couldn’t see it or correct it.
Will we reach break-even before we run out of money?
Ok, you’ve got a good, differentiated product and an early-stage team that’s clicking on all cylinders. What else do you absolutely need? In a word, “Money”. This may be what kills the most startups. Even a well-funded, VC-backed startup has little margin for error. You basically get one swing at the ball, maybe two if you’re lucky and have committed investors behind you. Of course, for bootstrapped startups, this issue is even more severe.
Even if you’ve done the right things, it’s quite common for “everything to take longer than expected”. That’s because building momentum from a standing start is REALLY hard. And progress on this front usually isn’t linear. It comes in “fits and starts”. This creates a roller coaster of emotions for the founding team as wins and losses come in on early deals. All while the clock is ticking and the bank balance depletes. This puts a premium on creating as many early wins as you can. As early as possible. Momentum builds on itself for a new product in a market segment. So even a bit of early traction now can lead to much bigger things six months or a year down the road. When the money would be running out.
Are other tech startups working on a competitive product concept?
Now you’ve got a good product. And a good team. You appear to be making enough progress. Maybe you can outrun your depleting financial resources and get past breakeven! But if you’ve picked a market segment ripe for innovation, what other garage startup company is working on the NEXT big thing? This is a constant worry for a startup CEO and her team in a dynamic market.
I remember in one startup I headed up, my heart pounded almost continually. Usually while reading the trade rags about yet another competitor entering our space. Obviously, you have to track these things. It is quite important to understand changes in the competitive landscape. But most of the time there isn’t too much you can do about it. So try not to lose TOO much sleep. If you’ve got a good business model and product, have confidence! I’ve found that in all but the most extreme cases, tech startups can survive the competitive onslaught in these situations. As long as you execute. Which is always the toughest part.
Will the thousand-pound gorilla stomp on us before we reach maturity?
Even the innovative tech startups entering around you don’t strike the same fear in your heart that the established market leader does. You are probably entering the segment because they are in some way fat and happy. And have left holes in their game, allowing you to compete. Bureaucracy and girth usually work against them when responding to nimble startup competitors. You may also be targeting a niche within their overall market segment that they barely notice. But if they actually view you as a real threat. And decide to throw their full weight against you, they can crush you. And you know it. In my experience, this is the greatest fear of the startup tech CEO, which most often DOESN’T kill a tech startup. For a lot of different reasons. But it’s still always one of the biggest fears, and of course it can happen.
Did I pick a big enough/small enough market segment to thrive?
Sometimes you do everything else right except picking the right target market. This can be a hard choice. Especially because in some vertical market segments, market-size data may be hard to come by. But this is still a very important upfront task. If you pick a segment that is too small to support your business, even a great market reaction may not be enough to keep you alive. If you pick a segment that is too big and noisy for you to gain significant exposure and compete in the long run, you’re also not likely to have success. The old adage of “if we can only get 1% of this super duper huge market, we’ll be rich!” is a myth. Profitability almost always comes only to players that can gain a significant market share. I won’t go into detail on the whys here. It’s a complex issue.
But suffice it to say I’m usually more concerned about picking a market too BIG than too small. Especially if you’re a software-based business. The economics of software business models generally allow profitability in pretty tight market niches. If you win in that initial niche, you can often spread out from there. To adjacent market segments that enhance growth. Hardware-based tech startups generally need larger target markets to support the greater investments required in a hardware business model. In any case, spending serious strategic-planning time on this early on is very important. There is no one right or wrong answer on target market size. Only the best answer for your company’s specific situation. One based upon financial resources, product differentiation, exit strategy, and more.
Is the product really ready to release into the market?
This may seem like a minor consideration for tech startups. At least relative to the other questions on this list. Some of which may appear daunting to get past. And I believe that is true, in general. Releasing the product at the proper time seems eminently controllable. When it’s really ready, not too soon or too late. But you only get one opportunity to make a first impression, as the saying goes. And software and hardware products present a particular challenge to that old saying about first impressions. That’s because tech products possess a much greater potential for bugs, usability issues, and other problems. Compared to the average new food product or non-technical widget.
So even if the product is inherently great, releasing it before eliminating the bugs can kill your company. Almost before it gets started. It’s hard for a startup with no brand equity to recover from a bad start. Conversely, being too conservative and waiting too long can cost you precious months in the market. You may need this to establish yourself ahead of the coming competition. So this may seem easier to execute than some of the other major concerns listed above. But it’s still a delicate issue that deserves careful attention in your planning process.
My list of seven questions certainly isn’t the end-all, be-all of what tech startup founders consider. What does your list look like? What are the items that you believe you “absolutely have to get right”? Leave your comment or question below to continue the discussion.
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