High Hopes

A small high-tech company must scale many walls if it wants to transform itself from a wannabe into the next Amazon.com or Intel. In addition to the typical demands of running a business, tech entrepreneurs have a whole different set of issues to deal with when growing their companies. With today's dearth of technical workers, they must find creative ways to retain employees who could quit and find a higher-paying job the very next day. High-tech entrepreneurs must learn to strike a balance between their dual roles as chief technologists and CEOs--and bring in help if their shortcomings become apparent. And they must struggle to reinvent their companies if market demand evaporates with just one move from Microsoft or another giant.

Growing a tech firm, one that manufactures or provides technology products or services, or sells products or services exclusively through the Internet, is subject to unforeseen circumstances well beyond an entrepreneur's control.

But that doesn't mean small high-tech companies are letting reality rain on their parade. By and large, tech firms see good times ahead. In fact, according to a recent study by PricewaterhouseCoopers LLP, CEOs of small high-tech companies expect to achieve stronger revenue growth than their larger counterparts: Small companies anticipate a 27.1 percent revenue increase through midyear, compared to 18.5 percent anticipated growth at large companies.

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"The outlook at many high-tech companies is quite optimistic," says Murray Alter, tax partner in charge of tech and venture capital with PricewaterhouseCoopers. "Many have grown in sales and customers, and geographically in outreach. Despite [the Asian economic crisis], they continue to see strong growth in the near future."

Indeed, the economic outlook remains rosy for high-tech businesses. Still, cutting-edge entrepreneurs anticipate several potential barriers to growth. According to the study, more than two-thirds of the CEOs surveyed at small tech firms cite a lack of qualified workers as a stumbling block to achieving their revenue goals. Concern over market demand (43 percent), legislative and regulatory pressures (32 percent), competition from foreign markets (13 percent) and their own ability to manage or reorganize (26 percent) weigh heavily on their minds as well.

Taking this into account, we look more closely at these and other growing pains plaguing small high-tech companies--and what some successful entrepreneurs are doing about it.

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