Startups
Monika Krupa
Monika Krupa
Marketing Specialist
2021-08-04

These Can Kill Tech Startups. Why is Software Development so Crucial? [Updated]

Tech startups based on advanced technology are revolutionizing the market. However, not all such companies are successful. I decided to analyze the factors that determine the failure of tech startups. I paid special attention to the significant role of software development, which actually has a huge impact on the quality of the products offered.

Tech startups are companies with technology-based products. Their offer should provide added value to the market and solve a problem in an innovative and technologically advanced way, or simply make things easier for consumers.

It is obvious that many new tech startups are being created every year. Some of them are really successful. Several ones, though they started their activity only a few years ago, can now boast about their status of a unicorn. However, achieving this is not easy. In all this talk of success, we forget about companies that have failed. They could not cope with the challenges and, despite ambitious plans, they had to give up. So what are the common aspects that are likely to kill your business, continue reading to find out.

Lack of technological knowledge and IT professionals on board

Software development is a very big challenge for every tech startup. Creating a reliable high-quality product tailored to the target group is not that simple. Further, there is a time pressure to make the software development process run as quickly as possible and, preferably, with a low budget. As you may have noticed, there are a lot of potential threats, particularly when tech startups lack technical expertise. It is very simple to make a mistake and some very expensive yet wrong business decisions.

You need to answer one question: do you have the appropriate resources (developers and IT specialists) that will be able to build an effective product for you? Also, keep in mind that gathering such a team is often associated with a loss of time and higher financial costs. An alternative is in cooperation with a specialized software house, where you will find real professionals available at once. At this stage, the selection of technologies,software development methods and a competent team who has experience in building products from scratch is crucial.

In 2021 the lack of tech talents on the market is an ongoing tendency that might become a real threat for startups’ existence. As the number of ventures keeps outgrowing the number of accessible tech talents, finding a professional with a suitable skill set for your company’s profile might become a real struggle. In some cases, companies decide to outsource services, usually considering Central/Eastern Europe, in order to solve the problem in an affordable way.

Fierce competition and lack of financial security

This is another key factor in the success of tech startups. When entering a given market, you must carefully check its size and demand for the product you offer. You can't forget about the competition. It may turn out that the entry threshold is so high that in practice you won’t be able to reach for success.The tech market is developing at an astonishing rate. The number of startups with a huge potential is growing every day. Nowadays, it is not only about the mission your startup has on the market but also the speed of product launch and its quality. As the number of ventures increases, the ideas brought into existence might also become more similar to each other and this is why it's even harder to make it big on the market.

The business is going global these days, clients take a broad look at possible service providers which makes it even harder to become an attractive venture to collaborate with. Let’s be also aware of the fact that this tendency will surely develop, making the entrance onto the market even more challenging.

In addition, you have to consider the fact that even if you create a great product, you'll still need time to convince your customers. This is precisely why you need to secure financing. For how long? It all depends on the specifics of the product and the market, but you should expect 1-2 years without considerable financial profit.

The work of the development team and UX / UI designers is very important for this point. First of all, if you want to develop a product, you must have a budget secured for this purpose. It is important to choose an effective way of building your product so as not to spend the whole budget at the very beginning. My suggestion is to follow MVP. This is a very effective approach that will allow you to create a product with the most important functionalities. You will be able to implement the MVP on the market and constantly improve your product with discovered new functionalities. It is also a safe solution in budgetary terms.

The business is going global these days, clients take a broad look at possible service providers which makes it even harder to become an attractive venture to collaborate with. Let’s be also aware of the fact that this tendency will surely develop, making the entrance onto the market even more challenging.

You might definitely want to research the competition and trends all the time in order to stay up-to-date but there are also other crucial aspects to remember, such as the quality of the products or services. The more time you put into the testing and product creation process, the fewer pitfalls might occur in the post-launch period. This is what can help your business grow.

Business scaling decisions made too early

If your product is not yet well-developed, your financial results fluctuate and you do not have a permanent group of customers, so making the decision to scale your business may be a mistake. When deciding on such a step, you need to be certain of the stability of your business.

Start by making sure that your product really has an added value and high efficiency. Even the slightest underdevelopment can affect your financial result. According to respondents, a user-friendly offer affects the perception of the product in 17% of cases. Therefore, before you decide to scale your business, you should ensure the product is user-friendly and with sufficient software quality.

Slow product development

Slow product development might be beneficial as you have enough time to polish the product. On the other hand, you definitely want to speed up the process by implementing good time management practices and setting deadlines to overthrow the competition. An approach worth learning about is MVP (minimum viable product), an amazing way to both launch your product in a shorter amount of time and still succeed by gradually attaching new features based on clients’ feedback.

The development process can minimize many risks and significantly boost the process. Especially new startups tend to have meaningless meetings and additional tasks without a purpose. One of the most crucial steps to think out well is to create a suitable work framework, choose good product management software and keep collecting feedback to improve the process as it goes.

Lack of Financial Management

If you want to succeed, control your budget first. We all know how daunting this task can be but one thing's sure - you need money to make money. As a startup owner you ought to constantly monitor your budget and know how to manage it. Beside a clear strategy you might also want to always try to prepare a ‘financial pillow’ to fall back on in case of a major problem. Sometimes you might want to invest in order to multiply your funds by hiring a financial advisor. This step might be extremely beneficial especially as a newbie in an industry.

How to deal with these common threats?

From the software development perspective, it is important to ensure the high quality of the software and the possibility of adjusting the product to the user's needs. We are talking about tech startups, so a reliable product should be the very feature that will make the company stand out. From a business perspective, making the right decisions is key; it is often associated with choosing the right partners who can help ensure a stable product development process.

Consider all the cases presented in this article and draw your conclusions. Make your tech startup a unicorn!

Digital product development consulting

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