Creating a Tech Startup and Avoid Common Pitfalls
The Tech Startup Scene
Tech startups today are all over the map—but an interesting distinction is the difference between startups that heavily rely on technology, and actual technology startups.
Here are several kinds of technology startups that are prevalent today:
The prominence of security has skyrocketed, and it’s no secret as to why. Look at how much the security landscape at large has advanced, from the exponentially increasing occurrences of cybercrime to the complexity of executing a breach—a solid security posture is now a “must have,” for every business regardless of industry. It comes as no surprise then, that there are security tech startup companies cropping up everywhere.
Easy-to-Use Cloud Migration Tools
Countless companies are in the process of building easy-to-use migration tools for migrating from one cloud environment, or an internal virtualized environment, to another virtualized environment. These startups are markedly popular right now, probably based on the attractiveness of such a product for essentially any business that has the need to migrate—this kind of service makes an otherwise complex, critical IT project seamless, efficient and the responsibility of a third party. Can’t argue with that kind of convenience.
Single-Pane-Of-Glass Management (Regardless of Software Functionality)
Everyone wants single-pane-of-glass management; it’s a popular luxury in tech. It doesn’t matter where an environment lives or how many places it lives—an organization can have an on-premise data center presence, an AWS presence, or a presence on the other side of the globe. Regardless of geographic dispersal, IT Management teams want to use one software interface to manage all resources or assets. Generically referred to as multi-cloud management, this software allows an end user to have a single login portal that provides visibility into all environments, regardless of location. Companies providing such software are prevalent and growing steadily.
Software-defined networking (SDN), or software-defined solutions in general, are becoming ubiquitous; but they’re not just the new IT buzzword. Visit any tech tradeshow and you’ll see nearly infinite tech startups touting applications with diverse interaction capabilities, whether with infrastructure or other software.
If You’re a Tech Startup, You Need to Plan Ahead—For IT and Business Initiatives
Regardless of your tech startup’s core business, your biggest ally is planning. Think of it like taking a vacation: if you start to plan the trip after you’ve already left your house, there will inevitably be challenges you’ll face along the way. Did you turn off the stove? Did you put gas in the car? Where are you going? How long is it going to take to get there? Where are you staying? Did you reserve a hotel room? You’ll experience a similar scenario if you jump feet-first into launching a startup without putting enough time and effort into planning. This is the basis of many tech startups’ most common pitfalls.
One of the biggest mistakes I see tech startups making is trying to start too large. The cloud/virtualization hype that now precipitates decision making for infrastructure planning may not necessarily be the right place for a startup to begin from an IT perspective. As we all know, startup companies live and breathe in a pretty extreme ebb and flow for the first few years of existence; you’ve got to start, and then you’ve got to sell, period. As a result, there must be some upfront, out-of-pocket costs. But none of the startups that I’ve ever been involved in, whether my own, or in consulting for other companies, have had a revenue stream out of the gate. So, instead of going and committing to monthly recurring costs or stroking a check for 6 figures to purchase hardware, consider if launching your infrastructure makes more sense as a physical or virtual deployment and then talk to a provider to see what the different options cost.
Take it from me, a colocation solution will generate a predictable monthly cost that is considerably easier to manage than a cloud cost. You can go into your environment with a physical device, server, or multiple servers and have room to grow. Yes, the old adage used at the outset of all things cloud was based on the premise of overbuying and underutilizing RAM, CPU and disk. It’s not that this concept doesn’t have basis; it’s just that for a startup, right-sizing will probably make more sense down the road after you’ve started generating revenue. In the beginning stages, I’d recommend seriously considering spending $10,000 or $15,000 on infrastructure, parking it in a data center, and dealing with static costs.
When your business grows and your revenue is relatively predictable, that is the point at which reassessing and potentially considering a cloud strategy, rather than buying and managing hardware, will make sense. In this case, say three to five years from your company’s beginning, you’ll have the wherewithal to leverage a cloud service provider to manage your infrastructure and consume it as you need versus making an initial purchase and then growing into it.
Basically, don’t look at your ideal state of operations for Year #5 and build your infrastructure based on that. Just get past the first year.
Vital Considerations for a Successful Startup Launch: Development Endeavors You Can’t Get Wrong
You’ve got a challenging road ahead of you, but knowing the questions you need to ask yourself and your team at the starting line will take you a long way, from both a technical and non-technical perspective.
I’m a huge proponent of taking the most minimalistic approach possible where IT is concerned, because it’s expensive, and it’s not necessarily core to what you’re doing as a business—but it is needed to support what you’re doing. So, consider your core business and define where you really want your efforts to be focused.
For instance, if you’re a SaaS provider, you need outstanding programmers and a place to store and test code; but you probably don’t want to manage and maintain infrastructure. You’re in software, so focus on software development. Also consider what initiatives your IT environment needs to support. Using the SaaS company example again, consider that given your key practice areas, you probably need an environment that aligns with your initiatives; so it should allow your developers easy access and the ability to create, test and launch code.
- Start as minimally as possible, and as cheaply as possible.
- Define what is really needed that’s core.
- Ask yourself: do you really want to manage IT infrastructure?
- Identify business areas that should be most heavily invested in.
- Build a healthy IT environment. THEN explore infrastructure.
- Find the best IaaS provider for your solution.
Know the competitive landscape like the back of your hand.
- Who else is doing what we’re doing, and how are they doing it?
- What are they charging for it?
- What kind of revenues are they generating?
There’s always a rare exception, but there are very few tech companies out there who have a totally unique service that no one else is providing. Know your competitors and set realistic revenue expectations based on what you find.
Build an amazing team who reinforces your weaknesses.
Your first consideration after you know where your product fits into the tech world should be building an amazing team. If you’re the visionary, you probably have a natural tendency to lean toward one side of IT versus another, whether it be development or infrastructure. Knowing your strengths, put together a team of experts who can support the areas where you’re weakest:
Understand the financials—your cost to sales ratio in particular.
Understanding the financials is key. I’ve seen many startup companies come up with a great idea that costs, for example, $1.00 to develop, but will sell for $1.10 because of the competitive landscape, which is not a good cost to sales ratio. Know the costs of building your application and product and how much you can sell it for. As a frame of reference, consider:
- Competitive landscape
- Cost of building the application and product
- Viable price for selling the app
Be unmistakably different and have an excellent plan for getting the word out about your application.
We live in a tech world today where if one person does it, 15 people do it. Differentiate what you can do with your product versus what your competitors can do—and once again, to do that you have to understand your competitors. What are the incentives for customers to go buy from a competitor versus your business? Figure out what makes your product different, and if you can’t, find a way to make it different.
It’s a noisy IT world. How will you announce to the world that, #1, your product is awesome, and #2, why your product is better than the others? Develop a marketing plan for putting your stake in the ground, and for keeping it there long-term.
- Announce the awesomeness of your product
- Make it clear why your product is better
Find a proven, credible small business consultant who can vet your plan.
Don’t go it alone. Make sure you have people you can count on who are equally invested in the success of your business, will tell you bluntly if your idea isn’t viable, and has the skills to look for potholes in the process you’ve put together.
Fail to Plan, Plan to Fail
It sounds cliché, but it’s true. The road is long and winding, but startups are the future of what we’re doing in this industry, so guarantee your success by planning the right way. If you fail to plan, you plan to fail. Every startup is gung-ho to get out there and start selling, but it’s in your best interest take the necessary time to put a blueprint together—know what you’re building and how.