Overcoming the challenges of a tech startup
Starting a tech startup can be both exciting and scary. There are a lot of unknowns and twists and turns that can make founders nervous. Plus, there are odds stacked against you: According to HubSpot, an estimated 90% of startups ultimately fail, and 10% go out of business before their first anniversary.
These percentages don't just include bootstrapped companies that face financial difficulties from the get-go: Harvard researchers estimate that roughly 75% of venture-backed startups fail to reach the exit stage. But these numbers don't deter millions of startup founders around the world who are willing to take a chance on the odds. For these founders, understanding how to navigate the tough world of tech startups is crucial to their success and survival.
Understanding the situation (and your role in it)
The tech startup ecosystem is dynamic and constantly evolving, with innovations constantly disrupting the market. “Leveraging the power of AI is crucial for tech startups that want to stay competitive. We use AI to organize vast amounts of data and automate mundane tasks, yet AI is creating business and opportunities all around us,” says Zain Lakhani, founder of engineering consulting firm LightCI.
Taking the time to observe who else is in your industry can help you understand what makes you unique and carve out your own niche. The trick is to not stray too far from your original intention. “The most successful founders are passionate about what they do and believe they can make a positive difference in the world,” says Lakhani.
Additionally, realize that your initial idea may not be the final product you take to market. “Often, the first product or service a startup launches needs to be fixed before it becomes successful,” says venture capitalist Vivek Mehra.
Building the right team
One of the most important challenges for a startup is assembling a capable and cohesive team. Failing to assemble the right team can lead to failure of your startup; researchers have found that up to 60% of new ventures fail due to issues with the founding team. “In the early stages, every team member plays a vital role in shaping your business. Look for people who share your vision and passion and have the necessary technical skills,” advises Lakhani.
Researchers agree that teams need more than experience to succeed: “To achieve good team performance as assessed by external venture capital investors, you need entrepreneurial passion and a shared strategic vision,” says Eva de Mol, who studied Dutch startup teams. She concluded that “increased team experience leads to improved performance only if team members share the company's strategic vision.”
Securing funding
Funding is the lifeblood of every business, including tech startups. Whether you're bootstrapping, seeking angel investors, or securing venture capital, a robust fundraising strategy is essential. “There's no one perfect solution for fundraising,” says Lakhani. “Each funding source has different challenges. For example, bootstrapping may be easier at first if you have savings, but it can limit your growth rate. Venture capital, on the other hand, may demand rapid scalability and high returns. When working with investors, you need to be prepared to give them equity in the business, which can mean losing some control. This may be a minor drawback for some founders but a big drawback for others.”
Consider each financing option carefully and choose the one that best suits your business goals, not the one that gives you access to cash the quickest.
Starting and maintaining a tech startup is undoubtedly challenging, but with the right strategy and mindset, it can also be fulfilling. Understand your position in the market, build a strong team, and embrace the journey with an adaptable mindset; you'll be well on your way to turning your vision into a reality.
