Why startups fail is the topic extensive enough to write a couple of books and still don’t run out of possibilities. Let’s admit it: there are a million ways of what can go wrong.
While we cannot tap into all the risk mitigation tactics, we’ve tried to address some of the most common challenges tech startups experience at their early stages and the mistakes they do along the way.
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A growing business is much like a live organism with its own dynamics and a set of needs that need to be met in order to survive. Under the right circumstances and proper management, it grows, finds its way on the market, scales, and reaches maturity. However, not all of them. In fact, only 10% of all startups reach the maturity stage at all.
Among all the startup domains, early-stage tech startups are a tough nut to crack. They require high levels of productivity, profound time & resources investment, the balance between proven practices and innovation, deep insight into the market, a visionary approach combined with the ability to make pragmatic choices, and a handpicked team of developers with the right set of skills for a specific task.
Sound complicated? It might be, which is reaffirmed by high startup failure rates.
Some of the most common reasons, according to CB Insights, include the inability to raise the required capital, failure in product and market fit, incapability to withstand competition, and others. However, the problem itself lies way deeper, stemming from the way the project is managed.
Top reasons why startups fail, according to CB insights. Abto Software
In this article, we’ve reviewed and analyzed some of the most common mistakes made at early startup stages — during idea polishing, pre-MVP stage, and throughout the MVP development process.
Behind the scenes of a startup kitchen
Even not everyone hasn’t heard about the Lean Startup Methodology yet, the concept of a minimum viable product (MVP) is probably something most entrepreneurs-to-be are familiar with. This approach allows emerging startups to be flexible to the changing market and user needs by evolving even at the initial stages of product development.
The development teams who have successfully adopted this approach opt for product roadmap consistency and prefer continuous upgrades over creating revamped product versions. This approach can be a guiding light for the startups that are still finding their place in the market and a constant reminder to keep themselves on the track they opted for.
Core aspects of tech startup management
When it comes to tech startup management, the core aspects that need to be taken into consideration can be broken down into 3 elements. Let’s call them the ingredients that make up a startup kitchen. They are the following:
- project planning;
- startup team;
- the technology & approaches used during the stage of MVP development and beyond.
Let’s further review the don’ts of each of them.
Ingredient 1: Project planning
Project planning & top 3 tactics that will ruin it:
#1. Having a blind belief in your idea — and no need for testing
It was already mentioned above 35% of startups fail because there was no market need in their solutions, but we’d like to repeat this message just to have it sink in properly.
Product viability testing is the best thing you can do for your startup’s success. No matter if it’s going to be a cutting-edge technological marvel or a simple application with the features that outdo the competition, thinking with a market fit in mind from the very start of the project planning may help you save both team efforts and costs. Better to have it all thought out before launching the MVP, right?
#2. Thinking of product documentation as bureaucratic nonsense
This is another trap for starting startup teams: they rush to jump straight to the development without having the product outlined properly first. No wonder such teams experience a whole range of issues that keep coming up throughout MVP development — simply because nobody has thought of them before.
Focusing on work first and thinking that the vision will come along is not only naive but also utterly short-sighted. The clearer your vision of the product is portrayed, the greater are chances of smooth project workflows. Moreover, product documentation will help you communicate your project idea clearly and elaborately to the developers, let alone increase the chances of hiring a team that is better fitting to specific project needs.
The time spent on creating proper documentation will pay off, trust us – even if the project had to be delayed because of it. Taking time to work on noting down the project’s intricacies can be the best thing you can do to ensure achieving your project goals in the long run.
Requirements, product features described from users’ perspective, product acceptance, and project development timeline make up the minimal product documentation package. However, the list is not limited to these materials alone, and if you decide to add some additional resources to describe your product, even better.
#3. Once having created documentation, never coming back to it
Even though this anti-advice sounds obvious, product documentation gathering dust is not an uncommon case among startups. As development is in a full swing, the plans & work scope happen to change, unexpected issues come up, day-to-day business errands pile up, and there never seems enough time for proper project goals retrospection.
While seemingly harmless, this practice may result in overly project costs, product mistimings, and misalignment within the team. Therefore, take time to regularly get back to the product documentation, track the progress, and make adjustments to the initial plans if needed.
Ingredient 2: Gathering a team. Or what could possibly go wrong?
Here’s what might hold you back from picking up the right team of engineers & what other experts your startup potentially needs at the early stage:
#1. Focusing on building a fully-fledged team first thing
Getting an extensive team of various experts on board is not a necessity when it comes to early-stage startups. In fact, having one seasoned, versatile specialist is all you might need at the starting point. Opt for a partner who can get the job done, someone incorporating a number of roles and feeling oneself comfortable in consulting a range of domains.
This approach is exceptionally useful for startups being tight on a budget: as we all know, hiring in-house developers can be expensive, even the ones whose expertise might turn out to be insufficient for your project (which is not a rare case).
There is a way to avoid extra troubles within your project and not fall victim to the most common mistakes startuppers make. By partnering up with those who work with projects like yours, you’ll minimize the risks and get access to the best industry practices.
Later on, when your project is ready for scaling, you’ll be able to expand your team with the in-house experts, balancing off the number of dedicated and outsourced professionals. Developers, UI/UX designers, solution architects, data scientists, QA specialists, DevOps, and others — the list can go on and on depending on your project peculiarities and business needs.
#2. Looking for rockstar engineers only
While a chase after the top talent developer is highly popular in Silicon Valley and other tech hubs, it might not always be the best strategy for startups.
For those tech experts who haven’t worked in the startups before, getting used to the work dynamics, a regularly changing (let’s admit it) scope of work, and a load of responsibility for the product’s success often can be too much to handle. Hence, the teams experience high turnover rates, which has an adverse impact on the entire product engineering process.
The right mindset can be much more valuable than prior professional achievements and fancy credentials when it comes to recruiting a startup team. For example, developers offered by the startups-focused technology providers will quickly dive into the software development process without taking time for workstyle adaptation or project rhythm. They might not have a portfolio of impressive recognitions, but they will feel themselves in their element and perform accordingly. Such people possess a range of traits that are essential for any startup, such as:
- being excited about the company’s mission and having a spark in their eyes when talking about software engineering from scratch;
- being able to think from a user perspective while developing a product and see technology as the means to solve specific user problems;
- staying comfortable with constant work scope iterations and having a minimum viable product (MVP) mindset allowing them to focus on basic functionality first;
- keeping the high motivation to grow new skills and cherishing can-do attitude by doing things nobody in the team ever did before and know nothing about;
- readiness to go the extra mile by taking over a range of additional tasks when needed (such as client communication, project coordination, pitching, on-site deployments, making UI design decisions, and much more).
- being familiar with not only building systems but also maintaining them (for example, developers who worked with open-source projects).
Whether you op for an in-house expert or a technology partner, these are the traits to look for. Last but not least, keep in mind you need a team player to keep a good level of communication and synergy between everyone in the team.
When it comes to development agencies, they have well-established and fully-functional teams that have been battle-tested not once. Their members know how to interact with other co-workers efficiently and meet project goals together, which may be the best match for the emerging or early-stage startup.
#3. Underestimating the consequences of improper talent acquisition
You might think it’s not rocket science to carry out a couple of interviews… Well, it isn’t, but the weight of responsibility of selecting the right candidate and identifying his expertise within a short period of time is harder than it seems.
On top of that, it is a proven fact there are developers who are good at selling themselves during interviews. And then there are those who are good at doing their job. We’re not saying one person cannot have both traits, but the ability to discern it and measure the candidates’ capacities properly is a hard-gained skill.
A common mistake made during recruitment of a development talent is judging solely on the candidate’s background and previous experience. We’ve already discussed why rockstar engineers may not necessarily be the best fit for your project. The problem lies even deeper: developers’ experiences at each stage of a startup vary drastically. Thus, a great software engineer in a team of 20 engineers may not be able to work efficiently in a smaller team, and vice versa.
By working with a technology provider, you’ll be able to skip this step and jumpstart working on the project right away with the right set of people.
Ingredient 3: Technology & development processes, and their most common pitfalls
#1. Thinking way too big
Premature scaling is considered one of the most common engineering mistakes startups make. We get it, startupers have these great visions on the product roadmap and they want it all, now. Startup engineers often add fuel to the fire, too — those who work in big enterprise-level companies are used to building scalable solutions. However, the startup realities are quite different, and they hit hard for those who tend to be hyper-optimistic about the far-fetched future.
Scaling too soon is a waste of the startups’ resources which are usually scarce in any case. That is the direct way startups take to eventually find themselves running out of costs.
If you are afraid that technical debt will kill your early-stage startup — the risk of your startup’s resources depletion because of scaling is actually way higher. So better fully focus on product-market fit first (don’t forget about a market research at the very beginning). And if your startup gets successful, you’ll be able to allocate the gained profits to improving the product and fixing the engineering shortcuts.
There is no way to foresee future user needs with high precision without gaining substantial data and user feedback on the launched minimum viable product. That is why you might consider feature driven development (FDD) to be the most suitable approach for your startup – make progress on features when there’s a need.
The market offers a range of tools used to test various hypotheses out: user interviews and surveys, A/B testing, promo campaigns, PR & fundraising initiatives, to name a few…
One of the most famous feedback loops and one of the core components of the Lean Startup Methodology is The Build, Measure, Learn cycle. Lean Startup Methodology is one of the SDLC models (software development life cycle models, e.g. Agile, Waterfall, Spiral, etc.). This software development cycle helps startup teams to stay on the right track and make sure they achieve product-market fit with MVP and other consequent product releases.
Build, Measure, Learn cycle in Lean Startup SDLC. By Abto Software
#2. Opting for the promising (yet untested) technology stack
Don’t go after the trends. Just don’t.
New languages and frameworks look seductive to many engineering teams, but we’d advise resisting the temptation. Here’s why:
- new technologies have little history of failure to work with, which makes it hard to understand how things will break;
- the lack of libraries and little developers community insight increases the development effort & slows down the engineering process;
- opting for new technologies means more time will be spent on learning the system rather than focusing on working on features development & user experience improvement.
- sticking to newly emerged technology makes it hard to recruit new engineers with the knowledge of it;
- having engineers chase the current hype cycle might lead to having them rewrite the stack every couple of months;
- Working with not yet proven technology increases the risks of failure, which are already pretty high across the startup domain.
#3. Excluding engineering team from decision-making
In most cases, product engineers have their own take on the product, its features, and the roadmap, and it’s worth listening to them.
Being involved in the decision-making process sky-rockets engineers’ commitment to the project and the sense of responsibility for its success — and that’s exactly the mentality that a startup needs. That is also why it’s extremely important to hire the right type of engineers — the ones that can be driven by project vision and passionate about being able to shape it.
When it comes to decision-making, don’t forget there is also always an option to engage an external consultant. However, keep in mind there are risks external experts won’t be able to get into all the intricacies of your project. When it comes to startups, there is no one-size-fits-all approach — therefore, experts commonly provide a generalized perspective of market trends & user needs based on their background. However, they can help you out with providing a new perspective to your project, pinpoint additional user pain points, and potentially identify the weak spots of your product concept.
This list of mistakes and bottlenecks is definitely not an exclusive one, but it might help emerging startup teams better proceed with the early project stages, MVP development process, team scaling, product-market fit stage, and beyond.
The most important takeaway is perhaps to keep in mind that every startup is unique and the attempts to adopt a strict success strategy may most likely fail to succeed. You have to be open to a continuous process of testing out new ways and finding a perfect balance between what proves to work for your startup and what can be further improved or replaced.
Need a helping hand in launching a successful startup? Don’t hesitate to drop us a line and kickstart collaboration!