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With venture capital far more jaded after the dot-com bust and subsequent corrections, today’s funding can be challenging to secure. Quite apart from that crucial input, some other rather old school considerations often get glossed over by start-ups. Correctly equipping a start-up is essential, for example, and acts as a good litmus test for a company’s readiness to make forays into the market. Accounting will see it in the books, and customers will see it in the offer. In IT support services for businesses, it’s visible in the tech.
Also, while it might be the most cliched yet constant requirement of starting any business (and tech start-ups particularly), plan everything to the hilt. A persistent theme in start-ups collapsing some miles down the road is an overall lack of understanding and market savvy. Planning is the cure, and every member of the core team needs to “know” the tech (the value proposition), the hardware (if any) and the finances of the business. A tight communal plan in which everyone has a good grasp of every aspect of the business is nothing short of essential, after all.
Here are five key areas to manage before opening your business’s doors, and immediately thereafter.
1. Taking money indiscriminately
To the casual observer, it must seem all too simple. Venture capitalists will throw money at you if you have a great start-up idea, right? Well, the truth is often a lot more painful, and it sometimes takes significant schmoozing to get a crack at funding. There’s also a school of thought that’s wary of venture capital. However, there’s seldom any alternative but to accept funding to launch with a critical mass.
It helps to think of outside investment as a partnership. Competent legal aid becomes essential before signing anything, and only after every implication has been contemplated. Just like personal relationships, it’s worth doing a bit of investigation into a potential funder. Can you talk to previous recipients? How does the venture company behave around important issues? Are they supportive or mercenary? A start-up needs a very clear understanding between all parties on expected returns and their project timelines.
2. Failing to properly equip yourself (in the absence of a plan)
Often enough, that imagined three-man team with simple tech in a small office can be an unsustainable model. It can become necessary to add immediately upon launch, both to the team and their tech. No serious start-up will get to the point of funding without a detailed business plan. These days, that includes the correct hardware and connectivity setup.
Tech houses sometimes get lost in their own enthusiasm, forgetting that the public lump IT in with, well, everything IT. Customers won’t differentiate between your email server’s performance and your hardware wallet, for example. They simply see “tech” and expect all modern connectivity and performance to be superb in a tech start-up. Innovative, even.
There’s a difference between, for example, four highly skilled coders writing something brilliant, and those same four managing a business and dealing with the world of client queries, sales and comebacks. When going into business, plan to equip for business. The right staff, the most suitable hardware, and the most seamless systems and connectivity are all essential.
3. Improper or ignorant money management
Every core team member must have a good grasp of the business’ finances. Often there’s an immediate albeit logical temptation to divide skills according to areas of expertise. It can, however, become far too easy for tech development to waste months on something the finances will never carry, at least not now.
There’s often resistance to everyone developing the financial acumen needed to fully understand venture capital obligations, profitability, and the overall health of the business. However, basic financial planning hasn’t changed much over the last 100 years. The fundamentals are still simple. Certain key indicators remain, and all core team members need a solid grasp of their implications. A good grasp of cash flow and profitability is an essential attribute in any team member.
4. Not having a company ethos
Ethos is an often-used yet mostly misunderstood word, but every start-up needs one. Not having one – besides being tech geniuses – only goes so far, and that model is losing its appeal anyway. Company culture is real, and invariably sinks to unwelcome levels or attributes when it’s not decided and acted upon.
Make no mistake, the link between positive energy at the workplace, productivity and profitability are undeniable. Start-ups need to take the time to imagine their future and their overriding character and ethos in it. Ethos is more than spirit, although it has that ephemeral feelgood. Ethos involves claiming legitimate authority and applying it to the reassurance of everyone who comes through the door. Indeed, ethos may just be any start-up’s principal marketing tool.
5. When starting up, it should make a lot of noise
You’re only in business when you make a sale. Until then, it’s all just talk. As vague and costly as many other portfolios might find it, marketing is the most direct route to profitability. It costs a lot when done well. More frequently the most abused or neglected aspect of a start-up – especially those that came to launch on the back of a big-ticket client or two – without marketing aggressively, much remains unknown.
A start-up might find massive, global application for its tech on the back of it being even a slightly simpler or better way of doing familiar things. Without a consistent, budgeted-for and engaging marketing strategy, the company will never know the extent of their potential market. Nor will it experience the much-desired growth needed to carry it through its initial phase and begin able returning borrowed capital.
Choosing and planning for success
Forget about the big figures blinding everyone to other issues and choose a venture capital partner carefully. In a way, starting up is nothing but a series of connected choices. Every one of them magnifies once a start-up hits the market in a big way, so the choice is paramount. It pays to be selective about capital partners.
Boring, exhaustive planning is what separates those that fly from those that crash. Anyone can crash, it’s true, but without thorough planning – and mutual agreement around its importance – no start-up can expect a legitimate crack at success.
