The richest people in the world built their enormous worth by establishing a tech company that rapidly grew and expanded. Jeff Bezos, Bill Gates, Larry Ellison, Mark Zuckerberg, Steve Balmer, Larry Page, and Sergey Brin are all multibillionaires and all have tech backgrounds.
This has inspired a new generation of entrepreneurs venturing into the tech sector with the hopes of building the next Facebook or Amazon.
However not every startup becomes a success story. Those tech geniuses-turned-billionaires mentioned above were exceptions to the rule. Most startups fail within a few years after their establishment.
There is no one way to shield startups from failure, but things can be done in order to minimize mistakes and pave a better path toward success. The first step is knowing why most startups fail in the first place.
A Lack of Business Acumen
A startup is primarily a business. A good product that the market wants and has a need for is no guarantee that the venture will become a success. It needs an effective leader to make decisions that will result in growth.
Not all founders become the kind of leader that a startup needs. Although they know their product well and have a passion for it, they are not backed with experience in creating a business and pushing it toward success.
This, of course, does not mean that all founders become terrible CEOs. After all, there is a long list of founders who did great as CEOs. Those who were not born leaders, however, or do not have a background in business would benefit from hiring the right people to guide them.
There are certain aspects of the business that a leader cannot master immediately, and that include legal and financial matters. A financial and raising capital attorney can assist startups in filing paperwork, checking contracts and agreements, reviewing records, and other matters that, if not done right, may get the business in trouble later on.
Asking for help from an expert early on guarantees a more solid footing. The founder and their team would not be wasting time and resources because they made the wrong move early on.
It would also allow them to focus on the big picture stuff, rather than doing boring paperwork.
Not Having the Right People Do the Job
It is important for a founder to surround themself with people who understand their role and share similar values/goals for the venture.
Many startups fail not because of leadership, but because of the people who work with them. The members of the team should be capable of working alongside one another and create a product. If they have to source an outsider to support or fulfill the deficiency of one or more team-member, they may not be ready to start a company.
Sometimes, startups fail because of the investors, too. It is important that startups align themselves with investors who believe in the product and have the same vision as the founders. Differences will only result in conflict.
Ignoring the Customers
The term silo mentality is used to describe people who shut themselves in without realizing that the world is telling them something important. Startups tend to be so focused on developing a product and expanding their business that they exclude the output of outsiders from their decision-making.
As a result, they find out too late that their product is not user-friendly. Although there is a market for it, consumers do not know how to use it, or they are not aware that it is something they need.
A tech product that nobody wants or can use flops. The startup becomes a failure.
As the startup grows, new problems pop up and new projects begin. During this time, it is easy to lose track of where the venture is heading and what it should become.
When businesses lose track, especially during growth, they begin to alienate their existing consumers. Suddenly, the product has declined in quality. Many customers report issues and have become unhappy with the product. In an effort to expand and to entice new clients, the startup became a shadow of its former self.
Losing focus is deadly to any type of business, but especially to a tech startup. It is not easy to gain consumer trust because so much disappointing news comes out of the industry. There are also new startups appearing every day who may have better products and services.
Turning a startup into a company as big as Facebook and Amazon is never going to be easy. Those that managed to succeed poured hard work and passion into the startup. However, hard work and passion may not be enough. Having a good grasp of how to run a business, hiring the right people, listening to criticism, and focusing on one vision and goal can lead to success.