More than 500,000 startups are launching monthly in the US. Many decided to chase the idea of a successful startup and want to create the next Facebook or Google.
And many failed. Surveys showed that 90% of startups are shuttered within two years of launching. Let’s be clear, there is no golden rule that will ensure your company will thrive, but there are a couple of things you should plan and consider when making your strategy and business plan.
Why did startups fail?
Before we jump into the extensive guide and best practices to start your tech startup company, let’s look at the most common reasons why other projects come to naught.
The gut feeling may place lack of funding as the most common reason to fail a business, but as the research shows, a mismatch between what founders think will conquer the market and what users actually need is the most common mistake. Still, running out of cash is the second most usual cause, followed by a nonperforming team.
Stats seem implacable, but learning from other mistakes and preparing a solid foundation will help you succeed.
- Do I want to be an entrepreneur?
Going after the success stories of global giants is tempting. The first mistake you can make is to start your business at the wrong times. Do your research on market trends, the economy, and funding opportunities. Ask yourself if you are ready for the upfront time commitment, often sacrificing family relationships and hobbies. Also, starting a startup isn’t a sprint, a short-term undertaking, but rather a marathon.
So why should you bother? The answer is easy: success is gratifying.
- Create a business idea.
Finding your niche as a startup founder can be challenging, and a unique idea is the key to achieving your business goals.
But how to come up with a business idea? I pick some ways that can inspire you.
Examine your experience and skills.
When you start a technology company, you will need a solid tech idea. But you don’t need to be a programmer or former CTO to develop a brilliant idea. In fact, many thriving products started from domain-driven experiences. Maybe you work in the financial sector and see opportunities to introduce new software solutions that accelerate processes or customer service.
Look for problems
Another way is to look for problems to find a business idea consciously. This may sound strange, but reading news regularly and searching forums while you intentionally look for the challenge that needs to be overcome is a great idea. As mentioned earlier, startups mainly failed because there was no need on the market for their products, but when you start a business based on your target audience’s tipping problem, your chances of success are higher.
Add Value to an Existing Product
You don’t need to build your idea from scratch. Check the software products you use daily – is there anything you would like to add to them? Also, read FAQs and rating pages to identify problems or lacking features that could be your unique selling points in the components.
This, by far, is the most challenging way to develop a startup idea. Observe your and others’ life and ask questions about what needs to be introduced to change our daily activities or professional work. The important tip here is to focus on one target audience, for example, seniors, parents, etc. If you try to solve issues, you need to know exactly who you will help.
3. Idea validation and market research
Now, you have a unique idea – but is it really that unique? If you came up with a solution, why would others didn’t? Who will use your application?
Idea validation and market research are crucial. Take your time to do extensive data-driven studies of your competitors, target audience, and domain. Prepare to conduct those researches during all phases. Continuously listen to market trends and enhance user experience.
4. Build a leadership team.
Right people in the right places are surprisingly sparse. Finding partners who should be your company’s foundation often requires a lot of time and … good networking. If you decide to lead your company alone, consider looking for business consultants or specialists to get new perspectives or some battle-tested process in running a business.
So, how should you start? First, identify who you need:
- engineer with a technical background and a good understanding of your domain
- marketing/sales person who will build strategy and brand for your product
- finance/legal: tax regulations and legal cases can vary depends on where you set up your company and believe me, as a CEO, you won’t have time to follow all news and changes in law and taxes
5. Define your MVP.
Prepare a list of your core features and their purpose. Remember that MVP (minimum viable product) means a version of the product that early users can try and give you feedback for the next stages of development. This doesn’t mean you will start developing your application which will be ready for a market launch immediately. Many entrepreneurs get the MVP idea wrong and often fail due to a long time to market or never finishing their product.
The primary purpose of creating MVP is to allow users to test applications in the early stages of development. Thanks to their feedback, you can validate the product scope and get the first leads.
6. Raise Funds.
The next challenge for an entrepreneur is to raise capital to ensure startups will have enough funding until growth to the stage of financial independence.
Regardless of the form of financing your company, you need to prepare a product pitch with a business and marketing strategy, sometimes even with a ready MVP, to show inventors that your idea is worth their money.
So, where can you raise money for your business? Here are some examples:
bootstrapping, especially for the early phase of your business
- venture capital
- angel investors
7. Build a development team that delivers.
Now you have MVP scope, capital and go-on market strategy. The following step would be combining a high-performing development team. Simply put, you have two ways to approach it: recruit developers or hire a software agency. Each solution has pros and cons, which I recently covered in the in-depth comparison between in-house teams and outsourcing IT projects. Despite which model you choose, always follow the rules of agile methodology. It applies not only to software development but to company processes as a whole. Following an agile mindset means you will divide the scope of work in sprints, eliminating non-performing campaigns or features and introducing user feedback.
8. KPIs and Metrics.
In order to keep your newbie application successful, you will need data-driven analysis of what’s going on with your users, financials and human resources.
You could apply dozens of metrics, but the general rule is that less is more.
Choosing KPIs and metrics should be linked to your company goal, industry standards and product features.
Creating your own tech startup may seem like a thought battle with unknown results. Still, a validated idea, reliable leadership, a business plan and a high-performing development team allow you to stand out from competitors.
I started SolveQ as a software home, gathering experienced developers with entrepreneurial ownership and a deep understanding of business. Contact us if you are looking for a software development company that delivers.