Avoid at All Cost! 4 Reasons Why Tech Startups Fail
Technology startups are tempting business plans to many people who are considering a new venture to cash in on. The industry is, after all, booming and constantly fluctuating – and it is here to stay, and here to grow. But we’ve all heard the alarming statistics on the startup failure rates, somewhere between 80- 90% of all entrepreneurs who dare to enter the fray.
While it’s a realistic, yet heartening fact entrepreneurs must face, it doesn’t stop these driven individuals from putting the time, money and energy into the possibility their product or solution will be the next wall street darling. And when we say money, the investment can be as significant as drawing down their entire life savings.
However, most notably, a significant number of start-ups were launched with huge investments (both their own as well as private investors) to help them thrive, surprisingly they still failed. It can easily be attributed to a few simple, yet inexcusable reasons like not getting the product right at the ideation stage, to slacking-off after raising the funds to launch the product or service.
Inevitably, 80-90% of these hopefuls realize it’s not easy to launch a tech startup successfully. Below are 4 of the most important reasons why tech start-ups are faltering on their way up the demand ladder. Learning from these mistakes may catapult you into the 10-20% success category!
#1. Where Is the Marketing?
A lack of marketing, or having an unclear marketing strategy, can be extremely detrimental to a startup. Being a small fish in the big ocean of business positions you with a major disadvantage from the start, and that’s because nobody knows who you are or what you do until you get the word out there. Spending all your investment capital on operations, R&D, or redoing your website for the umpteenth time is a waste of marketing spend that could be used to reach your audience and really get your name out there.
#2. Lack of Administrative Experience
Proper management is the key to a successful venture, and that management requires extensive experience. Successful leaders have honed their skills over years after constant practice in the marketplace. They must be adept in team building experience above all else. Weak teams add very little value to the company and are usually the culprits who will eventually run the company into the ground. Conversely, a good management team (that was created by an experience leader) will help discover tactics that ensure a company’s success in the market place.
#3. Is There Too Much Competition Already?
Ask yourself this question, and be sincere in your reply! There is a lot of competition in almost every industry out there today. To get ahead of the competitors, it’s important to take your time and do your homework. Understand what your competitors are doing, how you can do it better, and what makes you uniquely different. Remember you’re going to be convincing people that your option is the best, so make sure it really is. If it is just more of the same with a different name, you may want to rethink launching the startup and save your cash!
#4. Poor Cash Flow, And It’s Shrinking Every Day
Lack of funds is one of the nastiest things that can happen to a startup. While most businesses believe that they have endless amounts of capital on hand at the very early stage of formation, most startups run out of cash as soon as they commence, and run head on into difficulties in finding further funding. Some of the reasons why companies run out of money is due to inadequate administration, deficiencies in sales and revenues and wafer-thin finances.
Now that you know what to avoid when starting up your Tech business, you are on your way to IT stardom! And when that success inevitably comes, you’re going to need to staff your burgeoning business. That is where CultureFit comes in to help. Talk to one of our IT Staffing Professionals to see how we can match the most qualified talent that not only meet the necessary skill sets, but are also the best culture fit to support long-term retention.