The Tech space isn’t just a lucrative and progressive one as it stands now—it’s appearing to be the future. The reasons tech startups fail are not peculiarly different from the reasons entrepreneurial start-ups in other industries fail.
However in the face of the speedy-evolving nature of this sector where even big existent tech companies have to deal with, according to GlobalEdge, the recurring challenges of increasing technical skills, the rise of baby boomers and the shifting pools of talents coupled with the growing trend of frequent cases of acquisitions and mergers among software and hardware companies, the failure of start-ups shouldn’t be so surprising.
Tech Start-ups do fail because of the following situations;Depleting operational funds
How much capital was set aside for the startup in the first place? How were the funds utilised and managed? Why did it run out faster than the business could start generating revenue? These are some of the questions that readily come to mind. Investopedia says, “Money running out also relates to an inability to obtain financing or further financing needed to sustain a business, especially in the early days, until a business can start generating profits.” This is more the case for a dynamic and fast innovating industry like tech-start-ups. It is inevitable that inventing and re-inventing processes for a new company would always require the injection of fresh cash inflows to mitigate the potential risks and teething mistakes. This then points to the need for a sure-fire source of capital, especially when there’s near certainty, based on your research, that your Tech innovation could sell.
However, “it's easy to become complacent when you receive an injection of funds. That's why you need to look beyond the money.”says AJ Agrawal, contributor at HuffPost. Perhaps a lot of wastages may not have happened if the business didn’t have the money to do so.
A Wrong Market Positioning
It is easy to assume that because the industry thrives on innovation and newness, people would be willing to buy in and patronise you when infact the reverse may be the case. According to CB insights as quoted on Rocket Space, “42% of failed startups attribute their failure to bad product-market fit” One astounding reason for this, going by Rocketspace, is “poor assumption based on ineffective data analysis, and market share miscalculation”.
In this respect, it is important that all your market facts are accurate because indeed your product could be good, but you are in a geographic and socio-cultural space where the consumers are simply not feeling its essence. You can always tell this when, going by the assertion of Andy Rachleff, CEO and cofounder at Wealthfront, “The customers aren't quite getting value out of the product, word of mouth isn't spreading, usage isn't growing that fast, press reviews are kind of 'blah,' the sales cycle takes too long, and lots of deals never close." This scenario should of course give rise to further innovation and creativity, but what if your technical details are out of date.Out-of-Date Technical Know-how and Passion
It does not always come down to having significant number of staff members. --Your tech startup is sure to fail when those constituting your workforce aren’t in the constant business of research and do not share your vision and drive for the business.
According to the US Department of Labour, “ the price of a bad hire is at least 30% of the employee’s first year earning.
It is apparent that investing in and employing the wrong people could set you back significantly. Much worse for a fast-paced technological industry. A team of passionate techs who are in the know—constantly in the business of discovering and rediscovering the ongoing in the tech industry-- and share your ambitions for your peculiar business offering can be an immense asset for tracking the progresss and failures of competitors and mapping out a competitive advantage.
The Rise of Competitors and Innovators
As detailed on Global Edge: “Software companies like Microsoft Corp., IBM, Google, Oracle Corp… should not sit too easily despite their sustained progress since recently consumer electronics products have been merging with products from the computer industry… these mergers and acquisitions mean that companies should expect competition from industries who were not previously direct competitors.”
Given this dynamic landscape, it is not far from the imagination the high potential of start-ups to be swallowed by these big tech names that are in constant battle to outrival one another.
Thus an easy takeaway is to know the intricacies of your industry and the moves the competition is making.
Be watchful of when they veer off the road, stop for gas or blow a tire, at those points you can learn from their escapades”. Take the right decision to either slow down or overtake the competition but never forget to internalize, evaluate and respond to customer experience and feedbacks.
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