There are a lot of ways to look at the journey of starting and growing a tech startup company to maturity. One way to look at it is like solving a puzzle. A big, scary, complex puzzle with thousands of shapes, colors and pieces. Every tech startup, from the most royal, well-funded ones to the most humble has myriad challenges that need to be overcome. In most startup companies, some of these challenges look insurmountable at times. Even the most successful tech CEOs can look back at a couple of inflections points in the company’s history, when it looked like the business would die if it couldn’t overcome one seemingly intractable problem or another. Somehow they found a way, through brilliance, hard work or luck (often a combination of all three). This is akin to picking out that one critical puzzle piece out of an ocean of pieces, that was essential to enable the filling in of the next section of the puzzle. So what are the key puzzle pieces that most tech CEOs have to find (solve) during the development from a startup to a mature company? The list below details some of the most common things technology startup leaders need to overcome, along with some suggested approaches:
Prioritizing the Essentials – There is never enough time or people in a startup tech company to “get everything done”. Or at least not the way you think it should be done. So a key strategic task is prioritization: separating the “need-to-do” vs. “nice-to-do”. In early stage startups, there are rarely enough resources and time available to take care of the “nice-to-do’s”. TRYING to do these only take away precious resources that have to be dedicated getting done the tasks that are required for survival until the next phase of development. Hiring too many folks in an attempt to get “everything” done, which burns through scarce financial resources, is even worse.
Working harder than you thought possible – this may sound silly if you’ve never actually worked in a startup before. But the reality is that when you get into “startup mode”, another gear becomes available to you that you probably couldn’t even imagine that you had.
Utilizing flex resources -To some people this may not come naturally. Many managers are just more comfortable with the well-understood, more typical full-time employee model. But this approach is usually limiting in a tech startup, and your scarce financial resources may be expended in an inefficient manner using expensive employees that continuously drain the coffers every month– and may not even have the right skill set for the current situation. I urge any tech startup management team to seriously consider the range of flex resources available in today’s market, such as contractors, outside agencies and consultants.
Missing Skill Sets
As mentioned above, sometimes you need to use flex resources such as contractors and consultants out of a need for sheer bandwidth. In most startups, you also should consider using them to fill in missing skill, knowledge and experience gaps that are inevitable in every early stage software, SaaS or hardware company. Sometimes these resources at the high end appear “expensive”. However, the cost of not doing certain key things right in startup land can lead to the ultimate cost – failure of the company. In addition, it’s important to normalize the cost of these outside flex resources vs. internal employees. You must keep in mind that you’re paying employees every month no matter what is going on, plus they have benefits and often incentive plans which are also non-trivial costs. Above all, remember that not getting the job done as required is NEVER inexpensive, even if it doesn’t lead to failure of the company. Don’t be penny wise and pound foolish.
Tech Startup Funding Shortfalls
This is a very difficult one; if it wasn’t an issue you’d just raise money! But in some early stage tech companies that is very difficult. Sometimes it’s because it’s just too early, the market is perceived as too small, or the entrepreneurs are unseasoned among the many possibilities. Whatever the situation, you need to find a way to squeeze more runway out of very little financial resources. Again the initial method of attacking this issue should be prioritization; making sure that you are laser focused on expending your resources only on what NEEDS to be done. If you absolutely need to come up with more working capital, one method of funding a startup tech company while the product is being developed or the company is pre-breakeven is to take on some contract work. This is quite common, particularly among early stage software-based businesses. Another approach to raising cash, if you are far enough along, is trying to get early customers to pre-pay, possibly in exchange for some special customized features. Lastly, if you’re really committed (you better be!) and there is no other way, you can consider tapping into home equity (if you have it) or filling up your credit cards. I mention these as a last resort for good reason. But if you’re “close” and this can put you over the top, it is worth considering.
Lack of Product Breadth
Usually a tech startup company begins with a single product, which hopefully turns out great! But sometimes there just isn’t enough bandwidth or resources available to rinse and repeat the full product development cycle several more times, to quickly to fill out the product line. Especially if your initial product is in a highly competitive segment that requires constant additional development. In many startup cases, it’s necessary or highly desirable to fill out the product line with additional offerings. That may be because you invested a great deal of money in building a brand and distribution “pipe”; in these cases the profitability of additional products marketed under that brand and pushed through that pipe can become highly profitable. In other cases, it’s hard to build a going concern on a single product because the product category just isn’t large enough. But without the necessary resources to fund expensive internal development, what’s a tech startup management team to do? Here’s a few ideas:
- Partner with contract product development companies on an low cash/ high equity or performance basis to bring the product to market primarily on someone else’s nickel
- OEM products from complementary, non-competitive hardware manufactures or software developers to fill out the product line
- Get creative with your own technologies; repackage/unbundle/spinoff parts of your existing technology base to create products at different price points
Shortage of Ideas
This might be the most shocking “gap” on this list; startup companies aren’t known for lack of creativity or new ideas. But in truth, at some point ever well runs dry. One good way to recharge it is to use outside resources to bounce ideas off. That might be a consultant or executive coach that you have hired. If you have almost no money to spend, it might be a free networking group of like-mined executives. At it’s most simple level, maybe just a friend who’s opinions you respect. There are many paths to new ideas; sometimes it’s just important to get away from the insular confines that can be a hard-working startup. Get up, smell the coffee and check out the blue sky. Sometimes ‘getting away from it all” for just a bit can do wonders in recharging the creative battery.
Key employees that have walked out – or need to be kicked out the door
This can be very scary when it happens. In a small, fragile company it might feel like the world will end if a certain key individual threatens to walk. I faced that early on in my management career. I was leading a software startup business and our lead programmer was moody and disenchanted, and his behavior became problematic. Not coming to work at times for several days at a time, not playing well with others – disruptive sorts of things. He was the technical nerve center of the business, with most of the key development knowledge of the product residing solely in his brain. At the time it didn’t feel like we could survive without him. But it reached a point that he was holding us hostage and I finally became fed up. He claimed to want to leave, so I called his bluff and let him go, at the time without a certain backup plan. Now, I’m not saying this was optimal! Certainly you prefer to maintain an environment where all key people want to stay; that should be job one. But sometimes it does happen and is beyond your control. Maybe the employee is asking too much to stay, or their presence is corrosive or even destructive to your culture. But fear not!
Believe it or not, everything will usually work out better than you expect. You may not see it at the time, but the essence of a startup is ‘finding a way”. And you WILL find a way, because you have to. Oftentimes the situation is already so bad that having the individual leave is an overall positive, not a negative. It may not feel that way at the time and you will be full of fear. But I’ve learned in my career a key lesson: “No one is irreplaceable”. There are lots of good people out there, often better than what you had, but you don’t find them until you look. So what happened after our lead programmer left? We were able to quickly replace him with a comparable, more mature technical talent who got up to speed on the product quickly and helped us take it to the next level. We ended up much better off at the end, although it was really hard to see how that would happen while in the middle of the chaos. If you let it work out, it usually will.
What’s your list of key puzzle piece that a tech startup team needs to identify and place correctly to keep the doors open? Please comment or post a with your own startup triumphs and near-death experiences.