Four Reasons Why Tech Start-Ups Implode

600-Why-technology-startups-go-wrongWhile some technology start-ups are destined to succeed, others have fatal flaws from the off, and are destined for an inevitable, inglorious demise.

In my experience, many fail or under-perform for preventable reasons, and I see the following four issues repeatedly.

1. Getting the proposition wrong

An innovative technological product may do lots of different things, but it's worth remembering that your customers’ views on what it does may differ from what you think it does.

You need to get your products into customers’ hands early and listen to them carefully.

For example, my current company went to market with product messaging about how it helped marketers improve website conversion rates. The software does do this, but listening to customers, they told us that the most compelling benefit was that it enabled them to remove bugs from their ecommerce sites twenty times quicker.

We now lead with this benefit, and have shifted our sales focus to the IT stakeholders who care about this issue.

2. Losing control of costs

As an entrepreneur, you know that usually everything takes at least twice as long as expected.

Although optimism is vital, it often leads to costs growing too quickly, based on unrealistic revenue assumptions.

I’ve seen start-ups investing hard in preparing for a tidal wave of demand, only to run out of money well before the actual trickle of demand has time to grow.

Be incredibility tight-fisted about costs until the business is making money.

3. Feuding between co-founders

Starting up is very stressful, and tests the best of relationships. Out of ten of the start-ups I know well, there’s only one partnership that's really worked long-term, and outlasted a $100m exit.

You can avoid co-founder feuds by…

  1. Being selective over the choice of partner. Analyse how they complement your skills and expertise. What stresses them and how do they handle it? What’s their work ethic like? Are they straight-talking or circumspect; sensitive to criticism or able to be objective?
  2. Get a strong ‘pre-nup' drawn up, so you know the deal if a partner has to go.
  3. Appoint an arbitrator on the board, a chairman who you both trust to take an independent stance.
  4. And when your investors insist on governance and controls, welcome it.

Should the relationship go wrong, it’s important to address it ASAP by using the chairman or a mentor as a conciliator.

However, if it really isn’t working, it is usually better if one of you goes. On-going feuds are more damaging than the loss of one person, and life is too short for long-term discord.

4. Lack of sales strategy

Techie founders often believe that the main challenges are in building the product. They think, ‘Build it and they will come', except no-one does.

B2B offerings in particular need a robust sales pitch and technical entrepreneurs need to find a customer early on.

Pretty average sales people often sound impressive to techie people who have no experience of hiring in this area. And even good sales folk often don’t have the essential start-up skill of being able to rework the proposition based on customer feedback. Take advice and hire right.

Start-ups that have compelling propositions, modest cost bases, energetic, collaborative teams and effective sales and marketing units are not guaranteed to work, but they will have a better chance of becoming that most incredible place to work: a company exploding with growth.

What’s your experience – leave a comment below.

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