Tech startups are often the birthplace of innovation. However, having the next best idea since sliced bread doesn’t always translate to marketplace success. More than half of tech startups fail by their third year.
Surviving the first few years of the startup jungle requires knowing what makes startups successful. Here are four time-tested tips to help entrepreneurs keep their tech startups alive:
Don’t Run Out Of Money
While this may seem obvious, financial issues are the leading cause of dying startups worldwide. Understanding the economics of running a business is critical to being sustainable.
Whether you’re running on investor money or bootstrapping your business, it is important to pay attention to your burn rate. A startup’s burn rate indicates how quickly it will use up its cash reserves.
Another key term to understand is your working capital. Your businesses’ working capital is the money set aside for the day to day operations. When poorly managed, a company can experience complications due to being asset rich and cash poor.
Take advantage of every financial tool available to you, including R&D tax credits, public grants and even loans to make sure you keep afloat.
Be Open To Pivoting
A major challenge most startup founders have that they are in love with their ideas. This often results in confirmation bias when analysing data about their operations.
Pivoting is critical to the survival of most startups. It’s very rare that an idea goes from the strategy room to the market and becomes an instant success. Pay attention to your customer feedback data to avoid wasting your time and investor’s money.
You may realise that you have to adjust certain parts of your strategy. In some other cases, you may have to focus your marketing on an obscure strength of your product which your customers love. Instagram originally started as a geotagging app before pivoting because they realised that most customers used them because of their filters.
Avoid Big Launches
Although the appeal of being the next tech superstar is sexy, it’s best to avoid the spotlight in your early days. Big launches are a pitfall for startups. The money spent on having a big media launch is often better off spent developing the project or marketing it.
It’s more advisable for new organisations to test their ideas with smaller launches. If the idea fails, it’s easier for entrepreneurs to pick themselves up. In addition to that, small launches allow businesses to pivot easier because of the smaller media spotlight.
Scale with Care
Scaling a business is the end goal of every entrepreneur; however, it can quickly become like quicksand. Premature scaling is reported to be the cause of death of around 70% of tech startups.
Scaling usually represents the positive growth of an organisation which typically means more customers. However, to meet the needs of more customers, you will have to take on more staff, introduce new departments and possibly add new product features. All of these are changes that could rock a company individually; when done all at once, it can prove very chaotic.
One way to burn out as a startup is to prioritise scaling over building a sustainable business model. The well-documented issues of asset-light startups like Uber, Lyft and Wework go a long way to show this.
Running a startup is difficult, but the benefits of succeeding are what make it worth the work. Even if you do not survive your first three years, you can reduce the pain of a loss by either merging with another company or selling it. So, don’t give up.
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