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.
I have recently analyzed several such cases. I was looking for an answer to the question why, despite an interesting product idea and funding, not everyone is able to achieve the established goals. This is an interesting question that experts have been asking themselves for many years. In this article, I decided to present my own point of view. I prepared four key factors that affect the failure of tech startups. In all this, I also referred to aspects of software development, which to my mind play a key role in the whole process.
No market need
People who develop tech startups very often blindly believe in their product. They think the idea is perfect and the market really needs this particular solution. However, the following scenario is very frequent. The development and investment period for product development begins. After some time, it turns out that the product does not meet the market expectations and the demand for it is too low. Realizing this not soon enough results in an ill-spent budget.
Software development perspective: When tech startups develop, they have to first make sure that the business model is effective, and the market really needs such a product. One of the solutions lies in engaging the team of UX designers. They create the prototype of the product and carry out tests to ensure that it is perfectly tailored to the needs of the users. Do not forget about this important element of the UX.
Lack of technological knowledge and real 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.
Software development perspective: 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 the cooperation with a specialized software house, where you will find real professionals available at once. At this stage, the selection of technologies, software development method and a competent team who has experience in building products from scratch is crucial.
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.
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.
Software development perspective: 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.
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.
Software development perspective: 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.
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!
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