Why Tech Startups Fail

Tech Startups are the brainchildren of eccentrics and savants. The ideas coming from some of these companies can be revolutionary and the people behind them have a uniquely particular skillset.

Due to their vast marketplace potential for some, investors are willing to infuse a lot of money to finance them. According to The National Venture Capital Association, 25-30 percent of venture-backed businesses fail.

“The beginning years of a new business can be perilous in all industries,” says Michelle Joseph, Founder and CEO of People Foundry. “However, these problems are exaggerated tenfold in tech startups, since large investments in the concept are made prior to businesses having a chance to develop their infrastructure.”

As a Talent Acquisition Expert who thrives in the tech industry, Michelle offers insight into many of the reasons that a tech startup will fail and expands on the relevance of each for success.

C-Level Leadership
While a great idea can get funding, it is what follows funding that is essential to a company’s long-term health. For tech startups, identifying and hiring the correct C-Level Executives in the early stages of a company’s existence can prove difficult since being the best programmer does not for CTO (Chief Technical Officer). A tech company’s youth and backgrounds in engineering and computer science (which are sparse in cultivating business proficiency), create special challenges in forming proper leadership throughout.

A lack of leadership is an obvious hindrance to growth, and even when a company does begin to grow at a steady rate, it is essential to have managers that can guide their team through rocky waters. In an industry that is growing and evolving at a faster pace than most, strong leadership is more crucial in tech startups than any other field. As a partner to a strong infrastructure, having the people in place to successfully navigate constant change is key to success.

Directly stemming from the quality of leadership is the culture that becomes so quickly ingrained within a company. Identifying leaders that practice and drive a culture to set the stage is imperative.

The alternative is promoting a false façade that ultimately becomes a costly mistake. Especially if people buy into a vision and realize it is not what the company exhibits.

While tech startups are known for their unique work environment, leaving a company’s culture up for interpretation can lead to inconsistencies within the brand. Just because a work environment is unique and different, does not mean it has to be undefined. Culture is very difficult to reverse. By making a concerted effort to drive this favorably from the beginning, tech firms can save themselves much hardship down the line.

Sales Team
Business development is the lifeblood of any company. While many tech companies have ideas that would fulfill a want or need of the public, it is often difficult for the innovators to translate this into a language that their consumer will appreciate and ultimately, purchase. A company cannot afford to overwhelm or intimidate consumers and interested businesses with industry jargon that will be commonplace to the creators of a product.

The personability that sales requires is impossible to fake. Having the right personnel in place to create and develop interpersonal relationships can make or break a product’s success. Successful salespeople will be able to learn the essential aspects of the company’s product and bridge the gap to the consumer effectively. Whenever sales fall by the wayside in a tech startup’s infrastructure, failure will soon follow.

Congruent Team Growth
Team growth that progresses at a similar pace as company success may prove to be the most difficult aspect for any company to accomplish. With the rapidly evolving nature of the tech industry, it becomes even more formidable to determine when the right time to expand the workforce truly is. While some tech startups will fall behind by not hiring enough new employees to meet demand, many more actually hire too quickly for their own good. By filling too many jobs too soon in the process, a company’s costs will increase too immensely to be covered by their revenues.

Aligning the hiring process with actual revenue stream and not relying on projections and hopeful expectations will keep the company trending in the right direction. This proves more difficult for tech firms because of the fact that they often sell a concept more so than a product. However, to avoid putting the cart before the horse, successful firms will maintain a constant funnel of qualified candidates in a queue while only hiring when it is necessary.

About Michelle Joseph:
Michelle is the Founder and CEO of PeopleFoundry Inc. She is an expert in Human Resources and talent acquisition. Michelle works with Chicago growth companies to build top-tier teams by forming partnerships to find the best people the businesses seek. Michelle has a strong voice in the local tech space, regularly speaking at engagements and presentations at 1871. Learn more about Michelle in an interview with Bootstrapping America on youtube.

About PeopleFoundry: PeopleFoundry’s recruitment process is unparalleled. Their dedication to understanding clients’ unique needs allows PeopleFoundry to actively work with the best candidates to help build a winning team. From sales to technology to everything in between, PeopleFoundry carefully matches talented professionals to the priorities and core values of each client. PeopleFoundry is not your typical suit and tie.

For more information please visit: www.peoplefoundry.com

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