Did you know, more than 50,000 startups are launched in the US? However, how many success stories do we come across?
It’s a small 10%, as a huge 90% of these startups shut down worldwide before climbing even one step on the tenacious ladder of success.
This is the inevitable risk of starting a tech business in 2023. Everyone wants to be the next Spotify or Facebook.
Starting a tech startup, however easy, is a dream job for many, involves many aspects like marketing, funding, legal, and so on.
While the stats are only numbers, a well-researched strategy will surely help you make your startup business skyrocket its way to the top.
Post-covid, however, investors are eager to invest in innovative ideas, labor is easily available due to the global recession, and there is a much wider scope in digital technology than it was in the entire previous decade.
In this blog, you will find some of the basics of starting a tech business, errors to avoid, and some tips and tricks that will put you ahead of the crowd.
What is a Tech Startup?
A tech startup is a company that brings technical products and services to the market. These companies solve a major problem in the tech industry with highly innovative and one-of-a-kind solutions to problems that are common to all yet difficult to eradicate or solve.
10 Steps to Start a Tech Startup – Step-by-Step Guide
Hoping to be the next overnight success in the tech world? You might want to take a step back here. Let me burst that bubble, NO startup idea is an overnight success. So STOP looking for one! A great idea solves or eases at least one big problem in your niche innovatively. Give a permanent solution, not a temporary knockout.
It can also be something that shares in-depth knowledge about your niche, not available at your competitors’ doorstep. Whatever you choose to do, make sure your product or service would be available infinitely and not exhausted in a couple of months.
2. Identifying a Problem
This is where you dive in. Identifying a major problem in your niche can be difficult, let alone finding a reasonable yet innovative solution to it.
Firstly, you have to make sure that the problem you’re picking is very common in your niche. Secondly, is anyone else trying to solve it? What is the competition? Is your solution long-lasting and readily available? Look for reasonable answers before trying to pick your pain point.
If you are providing a service, the questions remain the same. However, your research should include similar services provided by your competitors and their scope of business. This will help you organize and market your business effectively.
3. Market Research
Considering that you now have a great idea for your product or service. What is the next step in starting your tech business?
Primary Market Research
You can use the SWOT analysis at this stage to understand your audience better. You must allow your audience to answer subjectively and not with pre-derived MCQs. This is where you will understand whether your chosen problem and solution have scope in the market. Personalized answers are crucial at this stage, do not skip on that, or you will be left with general feedback which is not helpful for the upgrades or error analysis in your business.
This is yet another important step in understanding the market size, current trends in your niche, market response, emerging technologies, and competition. This is ideally done by a third-party startup market research organization because it involves huge investments. You should make sure that your third party is brilliant in your niche and in analyzing the upcoming trends to support your business.
Focus Group Research
To understand your customers’ and competitors’ reach in the market, you have to reach out to a ‘focus group’. You can use one or multiple focus groups to derive quantitative and qualitative data, which then helps make informed decisions for your tech business.
As the name suggests, surveys can be run via emails, social media platforms, or face-to-face with numbered people. A survey will provide data for customer needs, problems, and solutions related to your niche. This also helps in predicting the scope of your business in the future.
4. Creating a Market Strategy
Many people assume that marketing strategy comes after the launch of the product or service. This is partially true, however, your product will soon die if you do not launch it in a product-market fit.
In the words of Marc Andreessen who is an American entrepreneur, venture capital investor, and software engineer, “Product-market fit means being in a good market with a product that can satisfy that market”.
Your customer pain points and solution should be as specific as they can get for your product and marketing team to build a target audience. Your target audience is the people who will be benefited the most from your product or service. This way your product will stand out in your niche, becoming easy to scale.
Do not try to solve many problems at once, or try to serve multiple groups very early on in your business. This creates confusion and funds might dry out before obtaining minimal results for future investments.
5. Developing a Business Plan
This involves everything right from ideation to profit-loss numbers. Having a good business plan that stands headstrong in all situations will help you stay focused.
Starting a tech startup involves ideation, marketing, skilled labor, identifying your short-term and long-term goals, profit-loss ratios, and much more, which should be set before launching your product in the main market.
This also includes feedback from early customers or friends and family trying out your product. A good business plan includes an attainable vision to eliminate all possible errors in the product or service and upgrade it to something better with time.
Once the big picture is established, small parts will fall together.
6. Build a Network and Team
You can not single-handedly handle every aspect of starting a tech startup like code, product, marketing, promotion, and investors. Connections may seem difficult and overwhelming to make in the beginning, however, it is one of the most important steps in marketing and scaling your business.
The more you connect with the people in your niche, the easier it becomes to find investors, lawyers, designers, and so on.
Using these connections you can build a team including a product builder, a marketing strategist, a finance person, and a designer to make your idea come to reality.
7. MVP (Minimum Viable Product)
Overdoing your MVP from the beginning will only cause you to lose important time. The basic idea is to find a small segment in your community to help get feedback and work from there. This helps in speeding the procedure which can otherwise last for months.
Firstly, knowing the right market is crucial. Choosing the wrong market will result in limited to no feedback, whereas choosing the right targeted audience helps convert them into early adopters.
Secondly, it may so happen that even with thorough research and strategies you may end up with the wrong customer base. Thus, accepting, rebuilding, and improvising is necessary. Denial will get you nowhere in this hardcore industry.
Early sales are the easiest way to tackle funding issues in starting your tech business. Focusing on tackling a single problem in your niche goes a long way! This validates the user interaction with the product and gets them on board. Keeping costs low as compared to your market value + adding a unique factor becomes an irresistible offer for your target audience.
Working with your early adopters closely and validating their feedback and problems can help design a better product for your niche before the market launch. This will also help you predict if customers will find your products appealing enough to buy.
8. Preparations for Setbacks – A must!
Starting a tech startup all by yourself for the first time might seem overwhelming and scary. However, this fear is unavoidable. Assume worst-case scenarios and setbacks that can happen while running your business. This will help you prepare your mind and train yourself to tackle setbacks with ease.
What if your partner leaves? What if your design head joins a rival company?
Start with tackling the most common setbacks like funding alternatives, technical setbacks, etc, and provide attainable solutions to all.
“Funding is appropriate for products that have some traction in a large market. For the 99 percent of companies that don’t fit this bill, external capital can be a recipe for disaster. If you’re at the invention stage, just remember that necessity is the mother of invention, not money.” — Dave Bailey,
One common mistake while starting a tech startup is looking for funding in the initial stages of business. This way, no investors would be interested in a poorly presented idea, zero customer base, no marketing strategy, and so on.
However, when these aspects of your business are set in stone along with a constant early adopters base, investors would be approachable.
Funding Options in Early Stages
- Crowdfunding – Crowdfunding is not the easiest, however, if you can convince a small segment of your target audience about your business idea, they would help organize funds to launch it. Some methods of crowdfunding are Debt crowdfunding, Equity crowdfunding, Donation crowdfunding, etc. Some tools that can help with the same are Indiegogo, Gofundme, StartEngine, and Mightycause.
- Angel Investors – Angel Investors are usually residents of Silicon Valley and are people interested in funding innovative startup gigs through their personal assets. Some renowned angel investors are Gokul Rajaram, Ratan Tata, and Amit Somani.
- Family & Friends – Family and friends who believe in your idea might want to support your business financially too. It is always a good way to raise capital through people who know and believe in you. When you succeed, they might also enjoy the benefits. It’s a win-win!
Some of the important startup investors criteria you should meet for your tech startup
Investing in a product at its early stage for investors is based on their gut feeling. When you do not have numbers to show, people usually do not go for a blind bet. However, if your pain point is strong and the market is easy to enter at the given time, investors have no problem going through with it.
Market size is difficult to analyze in the initial stages of the launch. Investors usually look for startups to invest in that can soon become profitable enough to provide at least 10 times the returns on their investments. Startups like Uber and Zomato had difficulty proving their market size in the initial stages, however, these have ended up being the core profitable businesses in the market now.
Mark Suster says “For any investor, it takes a miracle to get investment dollars out of them if they’re not impressed with the team”.
Investors look for companies that have a valuable core team, without which it takes minutes for the entire venture to drown.
Your team should share the same values, have high technical and business-oriented minds, good networking skills, previous experience in your niche, and a team that will stick together, helping the company grow as their own.
While you must have realized that starting a tech startup is not certainly a bed of roses, however, if your startup business is ready with all the points listed above, it’s most likely the time to scale your business.
Firstly, elaborate on your business plans involving funds required to scale, excellence required to handle a huge influx of demand, technical assistance, etc
One thing you have to be prepared for is UNCERTAINTY. One can never be too sure. You should be flexible enough to seize the opportunity when needed and change paths for the long-term betterment of your business.
What you choose to do (or not do), your decision-making ability, is something that will make all the hustle worth it.
Names of Some Brands That Scaled Initially Without Much Funding
Without funds, running a startup business can be a little difficult. But it’s not impossible! Listed below are 2 examples of startups that became a success without using traditional methods of scaling your business –
Apps like Tinder are designed to scale via a network, which traditionally takes months and sometimes even years.
However, when Tinder was first launched, they organized a series of high-class parties in California where entry was only permitted after downloading the app. This proved to be a great marketing hack leading to 15,000 users – This is what we call an ‘overnight success.’
With this onboard network, a viral loop was created which had hundreds of people registering every day. 2019 stats prove that there were 5.9M paying users that year!
They have plenty off-the-rules marketing strategies that work, tried and tested themselves. When they first started in NEW YORK, even with its huge tourist appeal, the company was a huge blow.
One of their backers, Paul Graham, that they attempt a low-tech, high-effort hack to bring in the numbers, which worked like a charm!
Chesky and Gebbia went door to door in NEW YORK CITY, capturing as many tourist attractions as they could. These were then updated on their site leading to three times more bookings, instantly doubling their profit ratio.
The same hack was followed in Paris, London, Miami, and Vancouver leading to a hike in profits after uploading the updated photographs.
The two of them chose to solve problems with the eyes of their customers, leading to a company’s success like none other.
Key Factors to Consider While Starting a Tech Startup
👉 Scaling too early in a business can create a loss in finances, and poor marketing strategies later lead to the shutting down of the startup business due to funds shortage.
Instead, focus on market research, building valuable business relationships, bettering your market strategies, making your product viable to your target audience easily, etc. Scaling numbers will follow soon after, don’t rush your fortune here.
👉 Testing your product or service before starting your tech startup is a crucial step. Take help from friends and family or hire a skilled professional in your niche to test and review your product or service idea. Eliminate all bugs before launching your business in the market.
👉 Having a vision of future endeavors to market and scale your product from the begging helps stay focused and not lose direction.
Eric Ries in his book The Lean Startup answers a question that appeals to many, ‘HOW TO START A STARTUP WITH NO MONEY?’ In this book, he explained various ways to start a tech business right from the ground before you run out of the limited funds you own.
Errors to Avoid While Starting a Tech Startup
Not Providing the Right Product/service
A product that your target audience needs! Or even better, providing a product or service that solves a major problem in your niche or provides valuable knowledge about your niche is something that will help you grow your startup business.
Your product should be the perfect product-market fit in your niche, meaning that your product should be launched in a market that doesn’t already have it and is in dire need of the same.
Not Learning the Investor’s Background
One crucial step that startup owners particularly forget is researching well about your investor’s interests and business style. Are you investing time in your first formal pitch? Is your product one of a kind and not duplicated or duplicable easily?
Are there any legal restrictions to building your product or service? Are there any previous patents for your product or service? You can easily research your investors via social media platforms like LinkedIn.
Not Looking for Skilled Labor Before Starting Your Tech Business
Startup owners often have interesting ideas to start with, but forget the ‘imagination to reality’ part where one needs skilled labor to help make your dream come true.
Look for someone who is tech savvy, people in marketing and product photography, designers, social media managing, content writing, and so on.
Getting a partner to run your startup business with you is another crucial step to be implemented at this point.
Onboarding a partner will lead to sharing profits and giving up authority but a trusted and skilled partner would help take off the load, balancing all aspects of starting a tech startup together.
Why do startups fail?
This might be a never-ending answer with hundreds of possibilities. Not finding the right MVP, not finding the right product-market fit, poor marketing strategy, improper feedback, and funds, the list is long.
Can I launch my startup without investors or capital?
Starting a tech startup is a long road that requires consistent funds each step of the way. If you have the funds to start, go for it. However, this is only to get off the ground. This might surely help attract investors later on. Starting on your personal assets is risky, however, if you can afford to keep personal assets at stake for your business, it’s surely possible.
Does the 10% survival rate sound like a great bet now? A good idea goes a long way, so if you have one, hold on to it and get started. A good business plan, tech team, and marketing strategy will put you far ahead in the race.
The 90% shutdown rate is because people start with the wrong procedure, try to scale too soon, and invest huge amounts of personal assets.
While using personal funding is not wrong, do not get blinded and solve all the aspects of your business with patience. NO startup is an overnight success, believe in hard work and patience, and your night will come.