Posted by: Vikas Sahni | November 16, 2010

Why Tech Start-ups Fail – Lessons from personal experience

This is something I was planning to write about later, but have been encouraged by the response I got at my talk on this topic at BizCamp Belfast.  Therefore, started writing it on the train back home…

We failed twice!

The original intent was to provide a multimedia content development service, which never really took off.  The second attempt was a multimedia content development product that was released on time as per specs to excellent feedback.  However, it was a nice to have product…and people are no longer spending money on luxuries.  Now we are a software development service provider with a solid client base.

The usual challenges

Like any new venture, a tech start-up faces challenged due to:

  • Lower Cost Competitors – and you may not be aware of them till too late
  • Budget Constraints – unable to raise as much money as planned
  • Specifications – over/under specified product or service, you will spend too much time and money building it in the first case, and people won’t pay for it in the second one
  • End-user expectations – people want value for money.

The Comfort Zones

Technology start-ups are usually founded by technical people, who very easily drift into their comfort zone – development.  Most ventures go through the steps listed below:

  1. Market Research / Feedback
  2. Fund Raising
  3. Development
  4. Beta testing
  5. Instead of selling, loop back to 1!

You keep looping back till you run out of money or your investors run out of patience.  Go, start selling as soon as possible.  Do not go back to development over and over again, get out of your comfort zone.  Do not try to build in every suggested feature, and do not hesitate to cut your losses if there is no market.

Things to watch out for:

  • Is there an elephant in your space?  A big player, who may already be building what you are thinking of…go talk, elephants are friendly.
  • Are you ahead of the pack?  But not too far ahead, or there may be no demand!
  • Can anyone catch up quickly?  If so, there are many companies out there specialising in being the second…they will spend ten times the money that you can afford on development and marketing, add extra features, give away their version etc. etc. and overtake you
  • Have you done your homework?  There may be others who have the same idea, and they may get to market around the same time…no harm in asking your network if anyone has heard about anything similar
  • Will people pay???  The biggest question of them all…

Human Expertise

You need to know what works, and equally important – what does not work.  Learning is an evolutionary process, so ask for advice…and listen to it…

The Barriers to this are well known, a lot of people are not willing to share knowledge and many are not willing to receive it.  Admitting failures is not human nature, so we tend not to ask for help when we most need it.

In a start-up, a lot of knowledge is in the head of the core people.  When one of them leaves, the loss of knowledge can cause significant damage.

Complexity

Managing a Start-up is complex.  During your first venture, it is difficult to realise that all the specialist support roles in a large enterprise are no longer available and you have to do everything yourself.  The ‘Start-up’ is the keyword, you have to start everything yourself.

The challenges to this are that over-simplification leads to failures.  Controlled experiments  are not possible and generalisations not applicable…you have to try to get things right the first time.

What worked for us

Focussing on our Core Competency was the key.  However, that alone was not enough.  We learnt through a number of near-failures that it was equally important to:

  • Communicate continuously with all stakeholders (clients, employees, partners etc.) using all possible means – emails,  voice, chat, blogs and of course in-person meetings
  • Leverage Connections – use Facebook, Twitter, Linked In, attend conferences, seminars etc.

Hope you find this useful…as always, comments are most welcome!

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Responses

  1. This is really useful stuff, even though we’re not in the tech space, but we are always thinking of new workshops and services we can add. It can be applied across the board, whether a new application, or a new service.

  2. Very useful and important stuff for Start ups.


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