4 Ways to Keep Your Tech Startup From Tanking

The competition is fierce in the tech space. Many startups falter within the first year or two.

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By Murray Newlands


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You and I both know that not every tech startup is going to make it. Many startups tank within the first year or two; the competition is fierce in the tech space, and the economy isn't as strong as it was a few years ago. Getting an exit is becoming harder and harder.

However, the defining factor between those that make it and those that don't, according to Bloomberg, is a business plan. 85 percent of startups that realistically viewed their product and the competition and then made a comprehensive plan at the outset were still in business after three years.

I started my first business when I was 23, and I wish that I had spent more time planning out revenue models and cost structures before I had started. If you're starting your first or even second business, I strongly recommend getting as much strategic advice and feedback as you can at the start, and avoid the many mistakes that I made.

Your can save your startup from dying on the vine, but you need to optimize your business plan and do your research to help you make decisions as they arrive. Here is some of the best advice I can give you to help assure that your startup stays healthy and afloat:

1. Go beyond the tech.

So, you have an app. It solves a crucial need, and after beta testing it's made huge inroads and has great user reviews. Looks like you've got it made -- until you actually have to sell it. You may have the best tech in the world, but if you're not good at turning that into a business, your company has no future.

If you have little-to-no business savvy, seek out business experts who can give you the knowledge and expertise you don't have. You'll absolutely need someone on your team who fills that role, or you'll end up one of the countless tech startups whose funding is pulled because they can't monetize.

Related: Why You Must Have a Business Plan

2. Stay up-to-date with what's being funded.

Tech solutions industries go through phases of being popular. First it was hardware; then social networks, then gaming. Bitcoin was all the rage, and now IoT is popular. You can decide to be part of that popularity and catch the wind when investors want it, but remember that if it's hot to invest, it will only be hot for a period. You'll need to catch that wave, or be left behind.

Related: How to Land Your Startup's Funding Before You Even Pitch Investors

3. Know your funding cycles.

There are times when money is more difficult -- or less difficult -- to obtain. If you decide to approach a particular VC, where that fund is in their lifecycle is incredibly important to your decision. But it is equally as important to be aware of what the market is doing as a whole. Exits are down dramatically since 2015, and VC funding may have hit a slowdown as investors are pulling back on riskier investments. Stay abreast so your company can make the best decisions and come out on top.

Related: 3 Principle Sources of Funding Every Startup Needs

4. Know who wants you.

It is in your best interest to know which companies are going to acquire which tech. Which large players are going to want to buy that tech or that customer base? When you go liquid, you're either going to become an IPO or sell as an M&A, and most companies want to sell to get market risk off of the table in a sluggish economic environment. Last year's IPOs did notoriously terribly, so having an eye on who might acquire your company will set you up for a successful merger.

Related: How to Value Your Startup

In spite of the rate of startup failures recently, there is always a bit of hope that you can be successful if you put in the work to make your startup worthy of success. Make a plan, and do your due diligence before you make a misstep, and you have a much better chance of coming out on top.

If you don't have the knowledge or skills to work out a business plan, find out whom you can get this advice from. If you are going to be spending the next few years of your life building a startup, it's worth investing at this point. If you really feel you are missing a lot of these elements, consider adding someone with this knowledge or skill set to your founding team.

Murray Newlands

Entrepreneur, business advisor and online-marketing professional

Murray Newlands is an entrepreneur, investor, business advisor and speaker. He is the founder of ChattyPeople.com chatbot builder tool and Sighted.com. Read his blog MurrayNewlands.com.

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