Sometime around 2010, Joel Gascoigne had the idea to schedule social media posts in advance. He and a group of friends developed an app called Buffer that would allow just that. After Buffer launched and Joel saw that others were interested in such a service, he incorporated and took his software mainstream.
Joel followed a textbook formula for a startup. He discovered a problem, created a solution, and monetized that solution because there was a demand. He also understood that not every tech startup will become a tech giant like Google or Facebook. Rather, twelve years after its initial launch, Buffer is still a small business. With just over eighty employees, it manages almost five million registered users and brings in roughly $16 million a year.
There are approximately 1.35 million tech startups currently operating around the globe. Nearly 90% of those will most likely fail, many within the first two years. But don’t let that number discourage you. Information can be just as important of a resource as money. Understanding some of the reasons why tech startups fail can help you have a greater chance of success. Read on to learn about three common pitfalls and solutions that are relevant to nearly all startups.
And who knows? Maybe your startup will be one of the twenty tech companies in the US to defy the odds and reach $100 million in revenue each year!
Pitfall #1: Going it alone – Consider a technical co-founder
Just because you can create a startup doesn’t mean you bring all the expertise needed to the table. One of the first hires you should consider is a technical co-founder. A technical co-founder is someone who brings hard technical skills specific to your startup or compliments areas you lack. They can help turn an idea into reality, launch your product into the market, help scale up production, or ensure compliance with industry regulations. Regardless of which skill they bring to the table, technical co-founders can help your startup perform up to 230% better than going without one.
Another benefit of having a co-founder is funding. Solo founders have a harder time securing seed money, with team founders outperforming solo founders by over 150%. And if your co-founder has previous success in startups, all the better, as investors prefer to back someone with a history of success.
Pitfall #2: Hiring mishaps – Consider using a recruiter service
As you transition from ideation into research and development, and later into launch and scaling, your needs and infrastructure will change and expand. It is important to recognize not only what talent and skills you need but when you need them. Hiring too quickly could lead to bloated payrolls early on that drain much-needed capital. Hiring too late could let competitors get ahead. It is a delicate balancing act that varies depending on the needs of your startup and the expectations of your investors.
Two things common to all startups, however, are the importance of sourcing the right talent and the time-consuming nature of hiring. As the technology sector becomes increasingly niche, finding the right talent with the right skills can be like finding the proverbial needle in the haystack. This is where recruiters and recruiting services can provide a substantial benefit. And chances are, there are recruiters out there knowledgeable enough in your niche to pair you with the right talent as quickly as you need it.
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Pitfall #3: Leaving your data Unprotected – Consider cybersecurity a top priority
The majority of startups who fail will do so because they run out of money or investor interest dries up. A small study by Wilbur Labs put the figure at about 70%. So, naturally, most entrepreneurs have funding as a top priority, and rightly so. But many do not consider cyber security as a related issue to capital, so do not make it a priority from the beginning. This can be a significant, and serious, mistake.
One of the innumerable changes Covid brought was an increase in cybercrime activity. The sophistication and scope of these attacks have grown significantly in the last two years, with the number of attacks increasing by more than 50%. For small businesses and startups, however, the number of attacks grew by a staggering 152% during the pandemic. Why? Because often, new startups don’t have the resources to make cybersecurity a top priority, and it is making those who don’t vulnerable. A cyberattack can effectively dismantle a business, especially a young one. 60% of small businesses will close after a successful cyberattack, and eighty-three% of organizations have experienced more than one attack.
Every startup is going to face challenges along the way. Joel Gascoigne and Buffer faced early challenges, too. Joel and his team had to change Buffer’s central office multiple times because of employees’ visa issues. Hiring and visa concerns proved to be an initial challenge for the company. Buffer also suffered a data breach due to a cyberattack. A large amount of user data was stolen, and Buffer was temporarily shuttered until the attack was resolved. But the company rebounded and is still in business today.
Conclusion
Every entrepreneur knows that challenges will always arise. But it is how you plan, adapt, and respond to those challenges that make the difference. No startup can plan for every inevitability. And, certainly, things will happen that are beyond your control. But being well prepared for the challenges you’re likely to face will provide you with the advantage you need to go from a fledgling tech startup to a fully mature business.
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About the Company:
Peterson Technology Partners (PTP) has partnered with some of the biggest Fortune brands to offer excellence of service and best-in-class team building for the last 25 years.
PTP’s diverse and global team of recruiting, consulting, and project development experts specialize in a variety of IT competencies which include:
- Cybersecurity
- DevOps
- Cloud Computing
- Data Science
- AI/ML
- Salesforce Optimization
- VR/AR
Peterson Technology Partners is an equal opportunities employer. As an industry leader in IT consulting and recruitment, specializing in diversity hiring, we aim to help our clients build equitable workplaces.
