Startups around the world have a long road to navigate if they want to go from being just an idea to becoming profitable. Or even possibly a unicorn! Statistics show that 90% of start-ups eventually fail with just over 50% making it to the fifth year.
As a tech startup, these numbers are not irrelevant to you. Introducing a new technology to the market brings with it a set of unique challenges.
But don’t worry, we’re going to deal with each challenge you might face including how to overcome them.
Let’s begin.
FUNDING
In order to fully develop your startup’s vision and technology, money is needed. But one of the major problems faced by tech startups is knowing when and how to source for funds.
There are always Angel investors and venture capitalists looking for attractive start-ups to invest in. All you have to do is learn how to attract their attention and make a case for yourself.
Most founding technologists don’t understand the complexity behind funding their startup — knowing when to request for funds and what type of investor is needed. But companies that take the time to do their research and become strategic in choosing their investors often overcome this hurdle unscathed.
HIRING
Hiring team members for your startup can, on the surface, seem like a straightforward process. But it is actually not so straightforward. According to the 2011 startup genome report, 74% of high growth internet start-ups fail due to premature scaling.
When backed with investors’ money, most tech start-ups often go on a hiring spree. Which more often than not stretches their resources thin, bringing all sorts of problems that might not easily go away.
And then there’s the issue of actually putting together an effective team. When just starting out, you’ll most likely not have the financial muscle to compete with the already established companies for top talents. And that can easily hurt your plans of building your dream team.
Before beginning your hiring process, you should answer these questions.
- Are you looking for experience or raw talent?
- How much are you willing to spend to get what you want?
- Do you really need to employ full time members or is outsourcing a more viable option at this stage?
CONSTANT CHANGES
More than any other industry, the tech industry is home to rapid changes that can throw a startup of balance. Or even knock it down completely.
New technological innovations are being made everyday.
Competition for consumers’ attention is fiercer than ever.
And the consumers themselves don’t plan on making things easy for you — with their ever-changing needs.
There have been cases of tech startup founders who invested a lot of time and money into developing a product, only for them to realize when it was time to launch that the world has moved on from their idea of a solution.
So if you are looking to launch a tech product, you should always be aware of the latest trends in your industry. And if you are a non-technical founder looking to launch a technology-based product, you should be strategic about the app developers you choose.
Make sure you partner with agencies — like Weprototype Technologies — that don’t just know how to code, but also know how to make sure your product remains relevant post launch through extensive market research.
UNREALISTIC GOALS
Hardly will you find an entrepreneur who doesn’t think his/her product is the best thing to happen to the world.
And as someone who’s about to enter the startup ecosystem, I’m sure you have high hopes for your products. Or why else will you be signing up for long days and sleepless nights?
While it is okay to have an active imagination, it is always advisable to temper it with reality. Your morale, and that of your entire team, can easily be lowered because you failed to achieve a goal that was too far out of reach in the first place.
You should always set SMART goals if you want to keep your company’s morale away from a hammering without being timid with your expectations.
SMART stands for SPECIFIC, MEASURABLE, ATTAINABLE, RELEVANT and TIME-BASED. For example, if you are in the health tech niche, your SMART goal might be to have on boarded 20 different hospitals across Africa before the end of the year.
CYBER SECURITY
Taking your business online is the norm these days. And if you are offering a tech based product, it is a no-brainer. You are going to be in possession of valuable information like employees data, clients data, bank account information etc. It is usually advisable to store this on the cloud.
But moving to the cloud is not without its own risks. Cyber crimes have increased greatly over the last few years — and they look like they have come to stay.
There are hackers everywhere and not investing in top grade firewalls and antivirus systems can leave you vulnerable to their attacks. You should use a Virtual Private Network (VPN) and also sensitize your employees on how to handle important information.
PARTNERSHIPS
Choosing a company to partner with when your company is at its infancy can be a tricky business. While there is a huge upside to partnerships and collaborations, a wrong move can invite all sorts of problems for a startup.
This is most especially true in the tech world where technological advancements occur at a rapid pace. Startups could release an extensive line of products based on a particular partnership and technology, only for it to become obsolete after a few years. At this point, tough and crucial decisions on the way forward will have to be made.
Having a clear set of policies and goals will help you become more strategic with your partnerships.
FINANCIAL MANAGEMENT
When there is a huge influx of cash, startups tend to find it difficult to manage their finances, often caving under pressure. In fact, 82% of startups fail as a result of cash flow problems.
Expenditure increases when income increases and it is easy to lose sight of the primary goal you set out to achieve. Suddenly, there are a million things you have to do and a seemingly endless supply of money.
Without proper discipline, startups that don’t play it safe when it comes to handling their finances often enter a financial crisis.
In the early stages of your startup, you’re most likely going to rely heavily on external funds. One way to help avoid a financial crisis is to work with a financial consultancy firm.
TIME/PROJECT MANAGEMENT
Time can be a scarce resource. The scarcity is even more pronounced when you’re trying to grow your startup.
The ability to manage your time efficiently in order to get more work done is an important skill to acquire. Sometimes, tech startups focus too much on a single detail while neglecting others until it is too late.
Also, most tech startups are led by people who don’t have experience leading departments or teams. This lack of experience can lead to underestimation of the amount of time needed to complete a particular goal.
One way to combat this challenge is to be intentional about project execution and administrative tasks. You should also consider hiring an experienced team leader.
COMPETITION
If you are going to survive as a startup, especially in the tech industry, then you will have to make punching above your weight a habit. You should not underestimate the number or fierceness of competition out there.
Startups that fail to learn how their rivals keep on winning are made to drop out of the game. It is important to always keep your competition in your radar. Even the world’s biggest companies keep tabs on their rivals — Facebook vs Google, Apple vs Microsoft — so why shouldn’t you?
Facing off with the more established names in your niche can be a daunting task. The key to survival is to be aggressive and to take each encounter with your rivals as a learning process.
PROFITABILITY
According to small business trends, only 40% of startups eventually become profitable. Profitability is a major stumbling block that every startup must overcome if it wants to remain relevant.
It takes time to build a profitable tech startup. The journey isn’t always easy and most entrepreneurs struggle with this.
The path to profitability and the time it would take must be laid out before you even launch your startup.
CONCLUSION
There is no “one size fit all” approach when it comes to overcoming the challenges of a tech startup. But a general rule of thumb is that startups need to be resilient and focused if they want to achieve success.
What do you think is the biggest challenge a tech startup faces in its bid to become successful?
Let me know in the comments below.
DO YOU NEED HELP TRANSFORMING YOUR IDEA INTO A SUCCESS STORY?
Weprototype Technologies is a team of software developers, designers, business analysts, project managers, ex-founders and digital marketing experts with a single objective — to help you build successful startups!
