In the tech startup scene, there's one simple truth: Intense research, decisions, and tasks await any entrepreneur who dares to pursue the path towards startup growth. In fact, if you've made it past your first round of funding, you're probably beginning to realize that the journey to IPO may not be as straightforward as you initially perceived.
"Starting a business can be consuming, yet wildly fulfilling," says Ursula Nwobu, contributor at HuffPost. "It can be quite complicated, and may challenge you in ways you had not imagined. Knowing and anticipating the roadblocks you may encounter in your start-up journey could help you prepare beforehand, and possibly avoid common pitfalls."
A recent study conducted by Startup Genome found that 74 percent of high-growth internet startups fail due to premature scaling. Fortunately, premature scaling doesn't just happen; instead, it's the result of a few preventable oversights. The best tech startup founders know how to navigate these and other industry roadblocks. While there's no blueprint for success, following these major growth strategies will orient startups towards success:
5 Major Blockers to Growth for Tech Startups
1. No Growth Plan
Managing a tech startup requires careful planning and an ability to mitigate unforeseen challenges. The most important decisions should be based on a formulated and thoughtful plan. Unfortunately, many business leaders do not prioritize growth or business plans. These documents are critical to the startup's trajectory and shouldn't just be another tool used to impress investors and potential partners.
"Viewing your plan as a fundraising tool is just the beginning of the story," says Stever Robbins, venture coach and contributor at Entrepreneur. "You'll use the plan for so much more — for managing yourself, for operating the business, and for recruiting. Before deciding to skip your planning phase, consider all the implications and what they mean for your future success."
The best startup founders document all marketing assumptions, financial projects, staffing guidelines, and more. When the startup's mission, objectives, or values are questioned, founders will use the directional insight in these documents to guide and inform their approach.
Visit Bplans' How to Write a Business Plan [Updated for 2018] to learn how to build a growth plan.
2. Lack of Funds
Building a tech startup requires access to capital. The funds allow companies to proactively address consumer feedback, modify products, expand into new markets, hire top tech talent, and more. Without a funding strategy in place, startups simply don't have the money needed to grow. However, stories of founders regretting taking money from the wrong investor abound. It's always a good idea to properly vet an investor before signing on the dotted line.
"Recognize first and foremost that you are choosing a partner, not money," says Tony Tjan, managing partner at Cue Ball. "You need to go in with this mindset and imagine yourself spending significant time with this person. Do you feel a level of mutual connection and mutual respect? On the flip side, always ask yourself the proverbial airport test: If there was a snowstorm and you were stuck at an airport with this person, would you want to pull out your hair, be neutral, or be glad for the unexpected quality time?"
The best investors will share your vision, understand your vertical, connect you with industry leaders, and provide guidance needed to scale. Remember, finding the right "fit" takes time. Don't expect to find the perfect investor and close a deal with him or her overnight. Before pitching an investor, start by building an authentic relationship. What qualities do they look for in a startup? What types of investment opportunities are they looking for? Use these insights to inform your pitch.
Struggling to land your next round of funding? The RocketSpace community can help! Learn more in the Power of Ecosystem: How RocketSpace Fuels Tech Startup Growth.
3. Building the Wrong Product
What's worse than spending valuable time, energy, and capital on a product that ultimately doesn't resonate with the consumer? There's nothing more crippling to a startup's growth than building the wrong product. Without taking the time to understand the consumer, the potential for a misguided failure is always present. The best tech startup entrepreneurs and innovators invest in customer and market research before, during, and after creating a product.
"Often, new entrepreneurs adopt the 'if you build it they will come' mentality, assuming innovation is enough to grow a business," says Dionna McPhatter, cofounder at The Strategy Collective. "I encourage entrepreneurs to see data as a GPS. A GPS helps only when you're navigating streets you haven't been on. In the same way, research should actually uncover things you don't know to help you get where you're going, faster."
When a tech startup understands consumers' unique pain points, wants, and desires, it is able to craft a product that delivers the highest value. Additionally, when startups take the time to understand their audience and market, less time is spent going back to revise existing products. In this instance, the startup can commit to forward progress and momentum.
4. Trying to Do Everything Yourself
During the early stages of startup growth, startup founders will commonly try to do everything themselves. From product development and sales to marketing and accounting, a founder's day is overloaded with tasks, duties, and responsibilities. However, many entrepreneurs fail to realize that taking on too much work can actually stifle growth.
"Delegating tasks to others sounds easy, but it can be difficult in practice," says Neil Patel, New York Times best-selling author and entrepreneur. "Sometimes it seems easier to do something yourself. You think because you're an expert at it, you should be the one to do it. It could be writing a new landing page or preparing a proposal for a new client. It would be fast for you since you know everything about your product. But it's not really faster for you to do it because it's not a good use of your time."
The most important part of delegating is choosing the right hires. According to CoFounder Magazine and ArcticStartup, 37 percent of startup founders believe the biggest hurdle to growth is finding the right people to run the startup. During the hiring process, analyze applicants' ability to "take control." Do they have the skills and aptitude needed to accomplish tasks? Do they identify with the startup's core mission and values? Do they complement the team's unique work style? Can they pick up new skills quickly and can founders trust that the work will be done correctly? The best startup founders use these and other mission-critical interview questions to guide the hiring process.
5. Fear of Failure
Even with the best business plan, investment, product, and hires in place, there are no guarantees. On the path to startup success, businesses are frequently pressed with insurmountable hurdles. In many instances, these challenges eventually lead to failure. However, the startups that treat these shortcomings as learning opportunities are the ones that become most successful.
"Failure is something characterized by going bankrupt and seeing all your hopes and dreams smeared across the office floor," says AJ Agrawal, CEO at Alumnify. "But it's rarely as dramatic as this. Failure will happen on a regular basis. You will become so used to failure as a startup that you should be able to brush it away without any problems whatsoever."
If the fear of failure is preventing you from exploring new growth opportunities, Agrawal recommends facing it head-on. Begin by doing low risk and low chance of success tasks. When the project fails, what were the key takeaways? What can be done to avoid failing a second time? From there, work towards even bigger challenges with greater risks. By taking these calculated risks, you'll start to feel less apprehensive about failure.
Ready to Scale?
Building a tech company is no easy feat. Unfortunately, there is no guaranteed roadmap for success. However, avoiding these common missteps will surely point your startup in the right direction. Mitigate these and other growth roadblocks by learning from likeminded tech founders and entrepreneurs in a growth-oriented tech ecosystem.
RocketSpace provides leading tech startups with the resources, programming, and other supportive resources and services needed to accelerate growth. In fact, our San Francisco and London tech campuses provide:
- A curated community of industry-leading tech founders
- Targeted networking and programming opportunities
- Warm introductions to venture capitalists, advisors, and mentors
- Premium amenities like electric desks, nap pods, and an onsite cafe
From Uber to Spotify, RocketSpace has supported some of the brightest minds in tech!
Is RocketSpace right for your tech startup? Request a tour now!