7T, Inc. - SevenTablets

The 7 Top Mistakes Tech Startups Make and How to Avoid Them

04Mar
Read Time: 7 minutes

Startups face lots of challenges, to be certain, and it’s estimated that as many as 7 in 10 startups fail over the span of a decade. Consider these figures from  Investopedia:

  • Year One – 21% of startups have failed;
  • Year Two  – 30% of startups have failed;
  • Year Five – 50% of startups have failed;
  • Year Ten – 70% of startups have failed.

So how do you ensure that your business is among the startups that are still in business after ten years? Well, there are a number of mistakes that hold the potential to harm a startup. Let’s look at 7 mistakes that tech startups make and how you can avoid these pitfalls.

Startup Mistake #1 – Financial and Funding Missteps

In general, tech startups are rather costly to launch and operate. The technology and tech specialists required to succeed in this niche can carry a hefty price tag that’ll quickly drain a startup’s bank account.

What’s more, tech startups are less likely to find success with crowdfunding and presales, resulting in fewer fundraising opportunities. This makes good money management — and good investors — even more important.

When it comes to money management, it’s common to see the “tee shirt and coffee mug problem,” whereby a company spends money on things that are not effective in moving the company forward. The “oxygen” should go toward solid, efficient development, go-to-market strategies, client outreach and building a delivery team. But even with the best operational and financial management, some tech startups simply run out of money.

To reduce your chances of going into the red, diversify your money sources as much as possible and continually work to pull in new investors. New tech founders often fail to realize that their number one goal and focus should be providing oxygen to the company. They should budget roughly 25-50% of their time to this effort and not just in the original raise, but throughout the journey until a true Series A is closed. In the early days, this can translate into 60-80 hour weeks with plenty of time dedicated to the core business offering.

Tech startups require capital, but an intense focus on investors can be problematic if their interests conflict with those of the company’s customers or clients.

Avoid a scenario where you make business decisions based solely upon what your investors want; you will run into trouble if the investors’ desires conflict with the needs or desires of your customers. Ultimately, this is a recipe for failure because you risk alienating your profits from the equation. You could potentially face an entirely new path for your startup too.

Instead, work to find a balance that appeals to both investors and customer base. If you cannot find a middle ground that works for an investor and your target audience, it may be wise to seek a new investor who is more aligned with your company and its vision.

Cash equals oxygen for startups, with “time to revenue” being the most important metric in the company. This means cutting out any expenses that are not 100% focused on improving time to revenue!

Tech Startup Mistake #2 – Launching at the Wrong Time

Startups often launch too soon, before they are truly ready for primetime. This can be nothing short of disastrous, resulting in irreparable damage to the brand. It is easy to get excited over launch. In fact, the prospect of launch should be exciting. But business leaders should not allow that excitement to overtake good business sense.

Launch when your product or service offering is really ready — not a moment sooner or later. If you launch too soon, you risk releasing a product that’s subpar, leaving a bad first impression and alienating customers. Wait until your technology is well-developed to a point where it delivers true value with a positive user experience (UX).

Launching too late can be the death knell, as the old phrase is never more true with technology startups, “You only get one chance at a first impression” . Technology such as a mobile app or software platform can be released with just its core features and functionalities. You can always add additional bells and whistles down the road. You want your tech to offer value, without overwhelming the user, so it’s a fine balance. In fact, that brings us to the next mistake: feature bloat.

Tech Startup Mistake #3 – Spec Creep and Feature Bloat

Spec creep and feature bloat are perhaps the most common fail point for tech startups. It’s easy to fall into the trap of an over-engineered mobile app or software platform that is plagued by spec creep and feature bloat. Leadership may be keen to include every conceivable feature and functionality that a user could possibly want, but this strategy almost never pays off.

For example, users typically seek a mobile app for just a couple core features. Most other features are ignored at best; at worst, those “extra” features are overwhelming to the point they create a poor user experience.

Startups should devise a strong development strategy and stick to that plan as closely as possible. Do not continually add new features unless they are essential to the platform’s success. Maintain a narrow, precise focus for your technology, in line with your original vision and market research. If you confirm that the demand exists for a specific feature that was omitted from the original build, you can always add in a phase two of development.

Tech Startup Mistake #4 – Poor Scalability

As a startup — especially in the tech sector — all processes and systems must be designed with scalability in mind. This pitfall can play out something like this: a company establishes processes and uses multiple, disparate software platforms to operate their business. This piecemeal approach is workable while the business is small. It’s not ideal, but it’s workable. But it lacks scalability and as the startup grows, the company finds itself amidst a tangle of technology that’s snarling operations and limiting growth. What’s more, as the organization grows in size, implementing new technology becomes more complex and more expensive.

Scalability should be on your mind from day one. As you establish technology, systems and processes for your tech startup, they should be workable both today and in the future. Maximize ease of use, minimize steps in various processes and pick technology that will grow with your company.

Tech Startup Mistake #5 – Failing to Identify a True Market Need

It may seem like a good idea, but will that idea convert into a viable business? That is the question that tech startups must address. You must identify a true market need in order to find success. You need more than just a novel idea. Your concept needs to meet a specific need. If it’s too narrow or too broad, you’re apt to fail.

A tech startup needs to offer something that people actually want to use. That demand must exist or you’re bound to fail. It’s best to perform a bit of market research and release a simplified prototype or beta version that can be used to gauge interest and consumer response.

Proof of concept will empower a tech startup to proceed with confidence. Prospective investors will also feel more comfortable supporting a startup if they have confidence that their product or service is in demand.

Tech Startup Mistake #6 – Designing Technology Before Processes Are Established

It is easy to find yourself going full-steam ahead on a development project. There is lots of excitement and an eagerness to get started on a new technology. But you may be cruising for trouble if process flows have yet to be developed. This can result in a mismatch between the technology and the processes surrounding its use. The bottom line: process flows should be established first; only then can you build technology to aid those processes.

For example, let’s say your startup specializes in developing software for university admissions. You get a client and immediately dive into building a new software platform for the university. But they’re overhauling their admissions process and the new process flow has not yet been established. But development continues. A few months down the road, the software is deployed and the university finds that it doesn’t quite meet their needs. Their processes have evolved in a way that makes the software a bit “clunky.” Now, you’re facing a slew of change requests and the client is not thrilled.

This is a clear example of a case where the process flows and needs should have been established first; then the software should have been designed around those needs. This sort of inefficiency can easily kill a tech startup. A needs-based approach to development is always the way to go.

Startup Mistake #7 – Failing to Hire the Right People for the Job

As a tech startup, you cannot afford inefficiency. It is critical that you hire the best person for the job instead of packing an existing employee’s plate with lots of tasks that they’re poorly-suited to perform. Efficiency is key. To achieve this, you need specialists and experts.

As a small startup, you may not have the work volume to justify a permanent hire. This is a good example of a business venture that can benefit from tech staffing solutions. A managed IT services provider or staff augmentation firm can be a great option for getting access to specialists without the commitment of a permanent hire. You’ll get the tech talent you need to succeed, precisely when they’re needed.

Also, don’t be afraid to ask for help as you navigate the startup phase. If you believe that asking for help is a sign of weakness or ineptitude, then your startup is going to struggle. The best business leaders know when to ask for help; it’s only a sign that you are human and as such, you cannot possibly be an expert in all things.

Startups are bound to fail if they are plagued by inefficiencies and poor leadership decisions. Consider this simple but illustrative example: You have no idea how to perform a task on a new software platform. Instead of asking for help and getting a tutorial in the span of five minutes, you spend 45 minutes trying to figure it out yourself. That’s 40 minutes that could have been better-spent on another task. At scale, this can lead to tremendous (and costly) inefficiency.

Call in the experts and specialists when it makes sense to do so. This saves time, money and it helps you to avoid costly mistakes.

At 7T, our development team works with company leaders who are seeking to solve problems and drive ROI through digital transformation.  We have worked with many startups, so we are well-positioned to help you succeed in your venture by developing robust technology that supports your vision. In fact, 7T really loves startups and we even have a quarterly column 7 Startups to Watch, which features innovative startups in a variety of business sectors.

As an innovative Dallas software and mobile app development company, 7T offers collaborative, multi-phased software development services. We have offices in Dallas, Houston and Austin, but our clientele spans the globe. If you’re ready to learn more about our collaborations with tech startups, contact 7T today. 

 


Reach out to our team today!

7T - SevenTablets, Inc.

7T is a Dallas-based digital transformation and technology consulting company, specializing in custom software, mobile app development and cloud services. Their innovative solutions empower high-growth startups to accelerate revenue and equip Fortune 500s with the tools they need to streamline operations and achieve untethered scalability. With a unique Business-First approach, they partner with clients to challenge assumptions and deliver technology solutions with a 5-10x ROI. 7T's highly innovative team has launched over 100 successful projects by becoming ingrained within the client’s operations and company culture.

https://7t.co

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