Notwithstanding economic upheaval associated with COVID-19 pandemic and volatility in financial markets, it’s a great time to launch a tech startup. Consumer demand for new products, that leverage cutting-edge technologies, has never been greater. Explore 9 proven strategies that will maximize your changes for success.
1. Develop a needed technology
Venture capitalists fund roughly 1,500 startups every year. An additional 50,000 startups are funded by angel investors. A relatively small percentage of these venture-backed startups make it past their first round of funding and a full 75 percent fail. Despite overcrowding, and a low rate of success, the niche is still very attractive to entrepreneurs and investors.
The top reason for failure for most startups is a lack of market need for their product. They develop a product that not enough consumers need or want. To succeed as a tech startup the first key is developing a needed technology and viable proposition. Successful startups identify a need and develop a technology to satisfy it.
Sounds pretty straight forward, even obvious, right? As obvious as it may appear, you’d be surprised how many startups fail for this one reason alone. They focus on innovation. They develop a unique value proposition. But they neglect to perform in-depth market analysis where they’ll discover if there is demand for their solution, and if it meets customer needs.
Business ideas should be innovative and unique—but focus first on meeting a identifiable need. Innovation will come later. To ensure their solution has consumer appeal and can potentially meet customer needs, tech entrepreneurs and startups should develop a minimal viable product (MVP) that captures the core value proposition of their idea and take it to market as quickly as possible. This allows a startup to validate project potential, gain valuable feedback from users, make mission critical product improvements and limit risk.
In an environment where consumer trends are constantly changing, delivering a finished product to market is risky—you may simply end up delivering a product with little or no market appeal. For this reason, it’s always smart to start by introducing a MVP and testing your idea to ensure a viable proposition and learn about the needs of your target market.
Developing a technology that does not meet a clear and proven need is a recipe for failure. And while developing and introducing a technology that meets a clear and proven need does not guarantee success, it’s the first key to a successful tech startup.
2. Choose a strategic location
Where you launch a tech startup is much more important than many entrepreneurs appreciate. When you operate in the tech world, you need to be in the tech world. Starting your business around like-minded “techies” will open the door to talent acquisition, funding and strategic partnership opportunities.
Unfortunately, running a startup in a quintessential venture capital hub, like Silicon Valley or New York City, is very expensive—which explains why we’ve recently seen a number of new locations starting to experience growth in tech startups. In Europe, cities such as Stockholm, Berlin and Amsterdam are now hot spots for venture-backed tech startups according to Startup Ecosystem Report. Other European countries including Estonia and Poland are also on the list. Tel Aviv offers startups an impressive level of technological innovation, Toronto business-friendly legislation, Bangalore cheap local talent, and Utah’s “Silicone Slopes”… all of the above.
Determining the right location for your startup is really up to you. Just make sure your future base of operations is located in an area that offers a well-established startup ecosystem to lean on, as well as the strategic resources your business will need, be it access to talent, funding or partnership opportunities.
3. Surround yourself with talent
Knowledge and expertise are required to succeed as a tech startup. Surrounding yourself with the right people, the right talent, is key to positioning your tech startup on the cutting edge of the industry.
Establishing your company in a low cost labor market can play a strategic role in lowering labor costs and keeping your comapny lean, but don’t skimp when it comes to talent acquisition. Find and hire the best talent in your niche. Building a core team of competent and dedicated professionals will be the life blood of your startup. Having the right talent on your team will create new opportunities and ensure your business can achieve its objectives.
Develop a strong employer brand and attractive employee culture early on so that you can attract and keep key employees. Develop a recruiting program and process that attracts talent within your field—a program that is streamlined and efficient. No one is going to join your team if your recruiting program is subpar, especially not valuable talent.
4. Learn from the best
The tech industry is ultra competitive. Only the best survive, so you should try to learn as much as you can from key influencers, mentors and entrepreneurs in your niche—especially those players who have been most successful.
A great place to start is LinkedIn—it’s a great place to research, network and stay abreast of industry trends and news. It’s important to stay ahead of the competition. Startups that lag behind, fall behind—and simply don’t succeed. You need to be on the cutting edge, always introducing trailblazing products, services and concepts to consumers.
Identify the most successful players in your niche, learn what they’re doing to be successful, and than take your game one step further. Explore new business approaches and techniques. Learn what works, and what doesn’t. Don’t reinvent the wheel, but don’t think just because it hasn’t been done before, it can’t be done. Innovate.
In addition to getting involved on LinkedIn, set up Google alerts for keywords the define your niche. Participate in industry events and conferences that bring the best of the best together to share ideas, information and network. You’d never imagine how much information and opportunity you’ll gather while grabbing lunch with people you meet at industry conferences.
Network with the best. Learn from the best. Become the best.
5. Build a strong online image
Over eighty-percent of consumers research a company or product online before making a purchase. If you want your business to thrive, let along survive, you must build and maintain a strong online image.
Reputation is as important as ever—only now, you must also manage your brand identity online. In fact, digital communication channels are key to establishing and growing a strong image both online and offline.
Shoppers interested in your products will search your company on Google, Facebook and other social media. If they like what they find, you’ll gain a new customers, if they don’t, you’ve lost an opportunity. You can’t run a successful business anymore without a strong and engaging online presence that effectively portrays your company’s culture and creates immediate brand appeal with your target audience.
Research your competitors. Learn from what they’re doing online to engage their market. Indentify where your prospective customers hang out online and meet them halfway. You can’t be all things to all people, and you certainly can’t be everywhere at once. Pick one or two of the top ROI producing social networks where you target audient hang out and interact with them. LinkedIn, Facebook, Instagram are a few among a growing number of online networks and media you can leverage to build your brand and image.
Drive users to your website, not only to sell product, but to introduce them to your company. Establish a company blog where you share new products and projects—and show off your company’s unique brand and culture.
6. Manage growth
If you grow too slow you’ll fail—but growing too fast can be just as deadly. Premature scaling is one of the leading causes of startup failure. According to Startup Genome, it accounts for over 70% of tech startup failures.
So what exactly is premature scaling?
Premature scaling occurs when a startup—or small business—grows faster than it’s product or infrastructure can handle. Acquiring too many employees too quickly, rapid market expansion and increasing marketing investment can all lead to premature scaling.
The problem typically begins when a startup owner begins to focus resources and growth in one operational area of their business without synchronizing growth in other critical areas of their business. For example, heavy investment in product marketing, without proportionate investment in customer support is one of many forms of premature scaling.
Early signs of premature scaling include failure to meet success metrics, profit margin ratios are out of whack, your team is experiencing burn out, or your customer experience is suffering. If you notice any of these signs, act immediately. Begin by refocusing on your customers—specifically the customer experience. Gather feedback from your employees. Realign your operations and business activities to meet your success metrics.
The best remedy for premature scaling is avoidance. The best way to avoid premature scaling is to ensure you’re not outgrowing yourself. Perform in-depth market research and forecasting before taking steps to scale a product or service. And make sure your investments in infrastructure and critical support align with product growth initiatives.
7. Learn to adapt
One of the advantages of growing a startup over managing a large corporation is the ability to implement change relatively quickly across all business phases. The ability to recognize when change is needed, and move nimbly, is key to growing a successful tech startup. Whether the concern is changing direction in marketing, or enlarging office space to accommodate growing payroll, startups must be able to quickly adapt to unforeseen challenges. A startup’s nimbleness is one of it’s primary competitive advantages over well-established companies with entrenched bureaucratic processes and policies. Where they fight to maintain the status quo, a startup is adept at embracing positive change and constantly innovating.
But don’t forget… the most important application of innovation is in meeting the need of the consumers in your market. Top tech companies meet customers’ needs and are able to adapt as those needs change.
8. Develop a direct-to-market methodology
There are certainly advantages to developing third-party distribution channels for taking your product to market. However, establishing a sales force and sales strategy to support direct-to-consumer sales rather than relying solely on indirect third-party sales and distribution often allows a startup to more effectively establish and meet sales goals. As your startup grows, and the market for your product matures, indirect sales channels will become more important from a scalability perspective.
9. Invest in experienced leadership
We’ve already addressed the need to surround yourself with top talent. But you also need to surround yourself with talented and experienced leadership. A successful tech startup needs leaders who are experienced in the tech world. It also needs leaders who have experience in the full trajectory of a startup’s lifecycle—from basement apartment to IPO and beyond. Good leadership will help increase sales, avoid costly pitfalls and develop a culture that will outlive it’s initial founders.
Having fresh, young talent is critical. But sometimes it’s the hardened old veteran, who’s been around the block a couple times, that provides the edge you’ll need to succeed. Having a good mixture of age and experience is key to having a winning team.
Notwithstanding economic upheaval associated with COVID-19 pandemic and volatility in financial markets, it’s still a great time for small business professionals and aspiring entrepreneurs to launch a tech startup. The consumer demand for new products, and innovative products that leverage cutting-edge technologies, has never been greater. Applying proven operational, managerial and growth strategies will maximize your chances of success.