The major mistakes made when implementing a technology start-up and the ways to overcome them
The discussion within this article is opinion. You should undertake your own research and get advice where necessary.
You can find out more about our Web Data Platform which we think is an excellent way to get your start-up moving forwards.
Web Data Platform Launch - by Info Rhino
To try and fit this all into one article would be too much to undertake. It is still important to ask, what is a start-up, and what denotes a successful start-up?
When we think about what a start-up actually, our key criteria is the following;
When we think about a traditional business, we think of them in the following ways;
This is why many service provider technology companies cannot be a start-up, they are limited by scalability issues.
About this article
The author of this article is the CEO of Info Rhino Limited. We are a software consultancy with a start-up mentality, a good portion of our time is spent developing innovative products and platforms. The angle this article is coming from is thinking through how established businesses run "Enterprise Technology". It is vital that start-ups fully understand what a small business does versus with a large enterprise does in terms of its technology architecture. We want to demonstrate that our "Web Data Platform" is a great way to set up a start-up for a low cost without giving away equity too early on, or going down different rabbit holes that will lead to the failure of the start-up. This technology has been written for start-up in the property sector and from this has emerged a product which is the web data platform. It is only through going for the software development life cycle on an innovative product for a start-up, versus our significant experience in enterprise technology. Do we have the right to begin to create an article such as this? Do please read it with an open mind.
Some genuine examples based upon real interactions with friends and third parties creating their own start-ups. The author of this article has met many start-up cofounders over the years and is currently working with a few start-ups currently.
Genuine examples of failed start-ups using technology
Retail space reuse start-up
The cofounder of this this start-up had been through two rounds of funding and had managed to secure two and a half million pounds for the start-up. It amounted to nothing having spent all that money on bad technology and offices. They blamed the failure on the lack of focus on what the product actually was supposed to have been. Sadly, they didn't really have a use-case.
Mentoring start-up through an incubator
A friend, with decades of software engineering experience successful property investments, other small businesses decided to join an incubator to try starting from scratch because it could provide funding and access to resources. The start-up ended up failing, after struggling to find compatible C-Level skills with other cofounders. One big reason why this failed was that the co-founder whilst having a commercial vision for this start-up couldn't find strong enough software developers to implement the technology affordably. Hiring mid-level and junior software developers is expensive, and the competition for these roles is high. The incubator wasn't prepared to outlay substantial capital on the development needed to implement the start-up.
The friends and family start-up
There are many examples of this. Normally a more experienced co-founder has an idea or concept they wish to implement. They don't have the funds to pay for the technology but have a family member to is already a software engineer or wants to become a software engineer. Sometimes the website developer is of school age. This is a mistake on so many levels, the best-case scenario is that the software developer is a professional. If they are though, them having a full-time job and doing development for a technology start-up will significantly hamper what they can deliver. If the developer is not a professional software engineer, then whatever is created will have to be thrown away. The co-founder is then left trying to pitch a investment proposal developer involved will have to be bought out, and this can create division within the family. Sadly, the technology cofounder won't have the C-Level capabilities, or technology experience to implement the enterprise architecture. One way to overcome this is to understand the level the co-founder wants to go to. Are they passionate for technology? What is their expected level of remuneration? Can they happily take a lesser role whilst their skills grow?
Outsourcing overseas cheaply
We must recognise that overseas outsourcing is not cheap. Without devoting a large article to this topic, our experience tells us you need a strong technical lead with business skills to manage the technical implementation. We find it better to manage outsourcing the technical implementations ourselves. Often we commission specific tools and components, and assemble them ourselves. Unless you have an expert in this capacity it will prove very hard to outsource successfully at cost. Often, outsourcing overseas is a complete failure.
The Dunning-Kruger outsourcing conundrum
There's a common assumption by technology experts that outsourcing technical tasks they could do, could be completed by another technologist within a similar timeframe to themselves. A friend commonly found themselves having to rewrite large bodies of work. It can become more work than writing the solution yourself. Solutions developers who are more commercially minded expect that junior developers with a bit of guidance can deliver a similar product.
Thinking through the technological elements of a start-up so far
Certainly, this has been our experience within the start-up space. We either think it is relatively easy to outsource development cheaply to achieve the results we desire, or we think we have the capacity to do this cheaply through people we know, or on a goodwill basis.
The right way to implement a Technology based start-up
The reason technology start-ups fail
Cofounders will talk about scalability, but there is more to it than this.
Without getting into the technology of a start-up we can think about these basic concepts. start-ups are either;
MVP (Minimum Viable Product) approach
Bootstrapped, or have a large capital investment early on. Typically this is expected to build the first phase for a cost below �30000. By that point a version exists, with traction, and the co-founders start to look for investment. Typically the first round of funding will see the co-founders seek between �150,000 to �300,000 investment. The co-founders are intending to give away no more than 20% of the share capital, many only 5%.
Here is the major problem with most strategies - cost. The investor thinks they have an almost good to go start-up, the technology is almost there or thereabout, and just needs a little more reworking. The reality is the software is completely unfit for purpose and meets hardly any of the business needs - it needs rewriting altogether. At this point we should put on our solutions architecture enterprise hat and say - what is the going rate for a website developer, a database developer, and operations analyst? The key problem we have is these costs are anywhere between �40000, and �110,000 a year. We have to imagine that we need a small team and the rework could take at least one year. Complicating this further, we have a system in place that is meeting some commercial needs. We can't start right over, we need to manage the existing infrastructure and replace it with new architecture. These are known as transformation projects and the very complicated for enterprises to undertake. In large organisations, these projects can run into many millions of pounds.
Of course, this is not true for all start-ups, but if we aren't differentiating then we are not really a start-up. This is because software will already exist to onboard most of the business activities.
How do I find a CTO for my start-up?
The most important thing is, there are no rules. What we have seen, in our experience, are many tried and trusted formulas that fail for most people. The main reason finding a CTO fails is because the commercial person makes some very basic mistakes;
Over-value their commercial ability
Think they can find a developer who will be so in-awe of their commercial acumen that the developer will work a year days and nights, whilst the commercial cofounder does nothing
Thinks all that is needed is a website
Doesn't appreciate that the start-up is a lot about technology
Doesn't start working on the commercial side of things
Doesn't start building the online presence across different platforms and verticals
Hasn't thought through the sales funnels
Over-estimates their network presence within their existing sector
This all sounds very ominous but there is a mistake that exceeds all of the above by some margin - "The fallacy of the idea". Many of us have several ideas a day that could make us successful except for one huge drawback - it costs time and effort to implement. Almost all developers are salary driven, and many get paid very well. Telling a developer on a high salary you have a great idea, asking if they can work for free for 2 years, won't encourage many applications.
The next section gives our insights into what we think can work for start-ups not wanting to fail spectacularly.
Solutions to implementing scalable technology start-ups with value
Don't go broke
We have risked a lot in changing our business direction. Partly this was brought about by changes in markets, but more due to the passion to implement quality solutions we have created. We all have to recognise risk and when to rethink things. Try to have a reasonable level of protection.
Find solutions providers with platforms that can deliver your requirements
Find a solutions provider with a product that can deliver most of your requirements without spending a lot of money.
You may want a website that you can maintain the content management yourself, but this is a harder task than it first appears. Many Content Management systems are hard to move information between - for this reason engage a supplier skilled in websites and data migration.
You are going to be working with a company who will be able to provide more components and functionality as your platform grows. Your supplier will be capable of moving data between different systems and being able to think about your business verticals. The benefits you get - the supplier will already have the technology and skills to bring lots of information onboard quickly. The cost will be lower and you will get a more powerful platform. You still may decide to not use that platform longer term. All systems have their limitations but you can start-up quicker and cheaper.
Once you've committed to a certain level of payment and service delivery you can take more time to focus on the commercial side. Rather than having a CTO, you can have a technical partner that will be able to offer more practice expertise than a single person.
You should be careful not to hire just a website development company or a website designer. The mere mention of a project development team, agile methodology, and other types of jargon will lead you down an expensive path. You want a quick implementation, a clear set of deliverables, but with enough flexibility. The supplier should be comfortable with the timeframes and cost. Remember, this system implemented by this supplier, may itself be thrown away. This is why we recommend start-ups engaging a company who are more than happy to unwind the implementation, and help you to move you to a new system when this is required.
Create a product in its own right
We are currently in discussion with a logistical start-up. Whilst we cannot divulge the commercial side of things, we felt that a massive selling point would be to have a piece of technology that was self-contained and could be marketed as the solution. Having a "Logistic Widget" that the market doesn't have can help to differentiate from the competition. Furthermore, even if the overall solution is not built to a high standard - starting from this vantage point can help investors see that you care about quality.
Don't make a website developer a CTO
Given that we develop websites, this may seem self-defeating. There is a massive difference between a developer, and a leader with commercial acumen and significant experience. A great example of a good CTO would be one who understands cryptocurrency, has worked in finance, has passion for your start-up, and has several different skillsets.
Don't focus on the design first of all
This cannot be stated enough. Certainly, Search Engines do try to optimise websites based upon their usability but this must not be the focus. What is important is that content gets discovered over time, this can take at least 6 months to over two years for your content to start making waves.
Only hire technical people who have their own websites online
Just as hiring builders who don't have their own house is a big one, a website developer without their own website is a big red flag. The website isn't the real deal breaker, it is about how the developer has put their ideas out, have they connected to other platforms, are they thinking about online presence?
Be prepared to pay money for implementing a basic platform
This may sound glib, pay a fortune just to put a platform online when there is no guarantee of return? Yet this is what most cofounders do when they request funding.
Don't go to a freelancer website or middleman hiring website
We won't mention names, but we are certain you know who we are talking about. A really powerful example will really help make sense of this. We work with solicitors on occasion. We asked them if this made sense to them.
Should you hire a commercial lawyer to write a paragraph of a legal contract? Their answer was no. So why do we pay for developers who claim they will "Build four database tables and write a query" or "Create three web pages with a contact form"? Whoever works with you, whether it is to do a small set of tasks or a major implementation must be committed to the journey.
Another reason not use a middleman website is because three party/agency agreements can leave both the supplier and client at the mercy of the agency. If you must use an agency agreement, then ensure the terms are as fair to you as possible.
Conclusion on avoiding mistakes on a commercial start-up
We wanted to give a very honest perspective on what we see as a movement away from the cliched start-up approaches. Thank you for taking the time to review this and we hope it helps give some fresh takes on start-ups and technology approaches.
If you wish to find out more about how you can avoid making the many mistakes most technology based start-ups make, get in touch with Info Rhino here - Info Rhino's Contact Page