So what keeps you up at night? If you’re a tech startup CEO or founder, the list of possibilities is very, very long. I like to say that the act of 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 of course some aspects of a startup are more critical to survival and ultimate success than others.
Let’s take a look at my personal top 7 favorites questions that should be considered carefully to improve the dismal odds for success:
Is my product idea good enough?
This is often at the root of tech startup success – or failure. Most everything isn’t in your favor in a technology startup, when you are the “new kid on the block” in a market segment. More often than not, the one thing that a SaaS, mobile software or hardware startup company 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. Sometimes there is time for a small pivot or two 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 – to establish the company as a going concern in your market segment. But there are still many other things that can trip tech startups on the road to success. High on that list is your co-founders and other early members of your senior management team. 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, 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 make it to breakeven 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 the thing that actually kills the largest number of 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. For bootstrapped startups, this issue is even more severe, of course. Even if you’ve done all the right things, it’s very common for “everything to take longer than expected”. That’s because building momentum from a standing start is REALLY hard, and progress of this front usually isn’t linear but comes in “fits and starts”. This leads to a roller coaster of emotions for the founding team as wins and loses come in on early deals, all while the clock is ticking and the bank balance is depleting. This puts a premium on creating as many early wins as you can create, 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, a good team and appear to be making enough progress that you may be able to outrun your depleting financial resources and get past breakeven. But if you’ve picked a market segment that is 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 particular startup I headed up, my heart was jumping on a monthly basis while reading the trade rags about yet another competitor entering our space. Obviously you have to track these things; it is very 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, 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 1000 lb Gorilla stomp on us before we reach maturity?
Even the innovative tech startups entering around you don’t strike the fear in your heart that the established market leader does. You are probably entering the segment because they are in some way fat, dumb and happy, and have left some holes in their game that will allow you to compete. Bureaucracy and girth usually works against them in responding quickly enough against nimble startup competitors, and you may be aiming at a niche of their overall market segment that they will barely notice. But if they do view you as a real threat and decided to throw their full weight against you, they can crush you – and you know it. In my experience, this is the great fear of the startup tech CEO that 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 it does 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 hard to do at times, especially because in some vertical market segments market size data may be hard to come by. But this is a very important upfront task, nonetheless. 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 busy for you to gain significant exposure and compete in the long run, you’ll also likely not meet with success. The old adage of “if I can only get 1% of this super duper huge market, we’ll be rich!” is a myth. Profitably almost always comes only to the players that can gain a significant market share. I won’t go into detail on the whys here, as it’s a complex issue. But suffice it to say that I’m usually more concerned about picking too BIG a market than too small, especially if you’re a software-based business. The economics of software business models generally allow for profitability in pretty tight market niches, and you can usually spread out from there to adjacent market segments to enhance growth. Hardware-based tech startups generally need to aim for larger target markets to support the greater investments generally required in a hardware business model. In any case, spending some 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 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 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 – when it’s really ready, not too soon or too late – seems like something that is eminently controllable. 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 saw about first impressions. That’s because tech products possess a much greater potential to have bugs, usability issues and other problems than the average new food product or non-technical widget. So even if the product is inherently great, releasing it before all the bugs are worked out can kill your company before it gets started. It’s hard for a startup with no brand equity to recover from a bad start in the market. Conversely, being too conservative and waiting too long can cost you precious months in the market, that you may need to establish yourself ahead of the coming competition. So while this may seem like an easier area to execute in that some of the other major concerns listed above, it’s 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 important things that founders of tech startups need to 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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