01 Sep The 6 Part Recipe of a Successful Tech Startup
Contributed by Leon van der Poel, Co-Founder of Ineo Growth Strategizers, Inc.
People often think that the difference between successful companies and failed companies is often down to luck. While luck can certainly play a part, based on evaluating key differences between tech company success and failure reveals there are 6 ingredients you need to stack the odds in your favour:
1: Commit to Excellence
Build a truly exceptional company. “Good enough” will not cut it! Customers are more educated and discerning now than ever, and your online reputation precedes you. It needs to be reflected in everything you do. A lack of quality in any part of your business will hurt it or, worse, lead to its failure.
The Top 20 Reasons Startups Fail, reveals that at least 4 out of the top 10 reasons are directly related to a lack of commitment to excellence.
2: Solve a Real Problem
#1 cause of startup failure: “No market need”
Most new products fail! Depending on the research you read, the failure rate is anywhere from 45% to as high as 90%! The wide range may be due to non-standard definitions of failure, and differences in industries. But, irrespective of the number, all the studies show a high failure rate. So it is critical to ensure you’ve done a thorough customer discovery exercise and uncovered the critical “jobs”, “pains” and “gains” that your prospective users/customers need addressed. Make sure your product/service does this and solve the highest ranked requirements first.
3: Get Paid!
#2 cause of startup failure: “Ran out of money”
Even if your plan is to give your product or service away for free to one group of users, in order to create a viable business you will have to generate income somehow from another group of users/customers/advertisers (often referred to as a freemium model). Only 3-5% of free users convert, so having a clear revenue strategy is a critical building block in your plan.
4: Get and Keep Customers
One downside of SaaS based business models? Low switching costs. The more value you provide and the more ingrained you are in a customer’s day-to-day life, the less likely it is that they will replace you. It costs less to generate revenue from an existing customer, than to acquire revenue from a new one.
Make sure you have a clear “get, keep and grow” customer acquisition and retention strategy and customers that love you!
5: Have an Exit Strategy
This may seem odd advice for a early stage company, but very, very few startups last five years and therefore planning for an exit is one of the most likely and prudent things you need to do. It doesn’t mean that you actually will exit, but it is a 6-18 months process to plan and execute a successful exit. Peak company valuation for virtually all companies is, on average, around 2 to 3 years from startup, so you need to start thinking about your exit pretty much in your first year of being in business!
In fact if you exit, based on the research we’ve seen, there is a 98% chance that it will be via an acquisition. Plan accordingly!
6: Invest in Coaching
Think about some of the leading CEO’s of tech companies – Steve Jobs, founder and CEO of Apple, Larry Page; founder and CEO of Google and Evan Williams, co-founder of Twitter. What did they all share? They all used coaches.
If you currently don’t have a business coach/mentor, you need to ask yourself – why not?
Coaching is for people who want to create businesses that can ultimately scale, and continue to grow with or without them. It can help them avoid critical mistakes or free them up to pursue their next big venture and life ambitions. When’s the best time to get a coach? Today! Everyday, time is passing and without tapping into the perspective, wisdom and experience of a great coach you’re limiting your potential and your business’ success. What will you be saying 3 years from today? “If only I had…” or “I’m so glad I did!“?