We all know about tech startups that go public and make millions to billions for their founders. But how much do we hear about the hundreds of thousands of startups that fail every year? Since you are reading this article, you must be interested in creating one. I will give you the advice that I am currently following.
You need to solve a real problem. A problem that removes a great pain point from its target users who are willing to pay for the solution. Your team must deliver an appropriate implementation for your vision. They need to be on time and budget. Else you will be too late in the market or run out of funds!
Finally, you need a great exit strategy. One that allows you and your team to exit the business with significant positive cash flow. Otherwise, you have a pipe dream that’s not worth pursuing outside of your dreams. Good luck!
Q1: Are you solving a problem worth solving?
A for-profit tech startup must solve a problem that is worth solving. Are you? A problem is worth solving for profit if the target market will pay real money to buy such a solution!
Q2: Do you have the right team?
Do you have the right team to implement your vision? Most startups have plenty of people with ideas who are excited about the prospect of a great future. Many startups lack the must-have doers who can get the job done!
Q3: How are you going to build traction fast?
If you have a great team that can build your vision to reality, that’s awesome. Now, do you have a solid, realistic plan on getting traction for your idea? Do your people know how to reach out to the target market? Do they know how to build trust with key influencers in your target market?
Assuming a 1–3 percent conversion of the early adopters to real customers, do you know how to build such a list of prospects? How to keep the early adopters interested, engaged while you get the product or service ready for the larger market? Without a large number of the early adopters, you will run out of steam fast and will crash and burn.
Q4: How are you going to raise funds from strangers?
The best case is not to need any external funds and use your own money for your idea. But if you must raise funds from strangers, are you ready for such a dance?
Do you know how to ask for money from strangers? Do you know how to convince them that you have a great deal that they should invest their hard-earned money into for a higher return in a swift pace manner?
If you are using some real money from your pocket, ask yourself when and how you think you will get a 10x gain on that investment. If you think it will take 3–5 years or more, in the tech business, that is too long, and you are not likely to find many early investors — the angel types — outside of family and friends that will be interested much.
Q5: What is your exit strategy?
Most successful tech startup founders move on to greener pastures or more interesting companies after their initial business turns profitable enough to exit. Planning to build a life-long company from your startup idea is a noble dream, but it might not be a reality. It is more realistic to assume that if you have been able to build a great success from your first startup, you will be able to do bigger and better things with the high confidence and hopefully cash boost you will get from your first company. Good luck!