3 Winning Factors for Successful Development of IT Startups
According to estimates, there are over 472 million entrepreneurs worldwide with approximately 100 million new businesses opened each year around the world. Historically, only 10% of those businesses survive. But don’t be hasty to bury the idea of your own startup, data shows that the number of successful startup exits grows year after year - 4,228 startup exits occurred worldwide in 2018.
How do they do it? What are the key prerequisites for a startup success? To unearth the success factors, let’s first look at the most common reasons for new companies breakdowns.
As statistics show, there is quite a list of reasons named for why the things went wrong.
See the full version: https://www.statista.com/chart/11690/the-top-reasons-startups-fail/
After analyzing the recited reasons and comparing them with the observations we made through 15 years’ experience of custom software development for startups from MVP to successful exits, we come to an interesting conclusion. Many of these reasons stem from just three factors that ultimately define how a startup will go through paces.
1.A Startup Idea That Comes from Real Business
The first factor of startup success relates to the core of each new business – its idea. Actually, most ideas for startups originate from real business. However, there is one important thing to consider. This idea needs to be checked, then cross-checked, and cross-checked again to make sure it is based on actual business need, not just the founder’s guess about it.
Several years ago, we had two startup clients, one from the US, another from Europe. Both in the automotive domain, both with ideas, which looked pretty feasible at first sight and solved a relatively similar problem in the business domain they knew pretty well. The major difference between those two startups was in their approach to building the product – while the first one rushed to get the product delivered as fast as possible, the other spent one more month talking to potential customers, reworking the product vision, and considerably adjusting it to actual business needs. Guess, which business turned out to be more successful? The one that took time to refine the idea.
You may say that delivering the product to market is important for a startup, and it’s true - time-to-market is crucial in the startup world. But in order to turn into a key to your success, the startup idea needs to be cross-checked at the very early stages by several players in the domain, be it potential customers, investors, or the market itself.
2.The Startup Raises External Money
This may come as a surprise for some of you, but most startups are founded by personal savings, friends and family (https://www.entrepreneur.com/article/230011). It does not make them much good though. Even if you have enough own funds, even if you can afford losing them, raising external funding is still important for making your startup a success. Why so? Let’s look a little deeper.
Two reasons why external money is essential:
- Speed and More Time to Reach Profitability. Additional funding gives startup founders a chance to hire more professionals and have their idea brought to life quicker. Also, the investment “safety bag” makes your startup more durable and grants you a possibility to spend more time on finding the market fit.
- Additional possibilities for marketing and promotion. Quite often, startups focus on developing their solution and route almost all funding to those activities. Most common keywords startups use in their search (after funding, of course) would be about architecture, web development for startup, UI, technologies, app development for startups. What is left behind in this scenario? Promotion and marketing, which make an essential part of a product success. External funding can help cover all necessary expenses for harmonious product development and promotion.
- Additional check of your idea and product viability. Finding organizations of angel investors, who trust you with their money, requires additional homework to be done in terms of pitching, shaping the idea, and envisioning your startup strategy, which itself is very important and valuable for your startup progress.
If you still doubt whether raising external money is a good idea, here’s a story that may convince you. Large unicorn startups that know their onions – Uber, Didi, Airbnb – do that too. Though these companies make a lot of money, they continue attracting millions in debt to develop their business before their competitors do it.
3.The Startup Team is Right in Terms of Composition and Motivation
It is no secret that many investors consider the team as the crucial criterion, when evaluating a startup and deciding if they want to invest in it. But what stands behind the term “the right team” and what is the gold standard for a startup dream team? Of course, a head-by-head composition of a team depends on the nature of your startup idea and the product or service you try to infuse to the market. However, some building blocks of a functional startup team remain the same across industries and product types.
Key players of a functional startup team:
- CEO. A good CEO is a very important figure for any startup. This should not necessarily be a startup founder. The founder provides a good idea, while a CEO must be the right professional with knowledge and experience in business administration, and understanding of your domain. A perfect candidate for this position has management experience, is passionate for new challenges, and burns with the idea. Besides that, this person should be 200% dedicated to the startup and ready to invest all their time into driving your company to success.
- Trendsetter. Though a trendsetter role is not often met in startup teams, having one in your team can make all the difference. Who is that person? The trendsetter knows the business domain and is known in the business domain. This person will explain and advocate your idea to the market, and inspire your own team. A perfect candidate for this position is a public person, well-known visionary with a number of valuable connections and acknowledged reputation in your business domain. A trendsetter for your startup needs to be followed and trusted by a substantial number of professionals, burn with your idea and be willing to share it with other people.
- Execution team. To make a team out of individual specialists, they need to be committed to a common idea and work in close contact with your CEO and each other. Your team may include various startup professionals, the essential part is that they must be ready to wear many hats. At initial stages, the team is usually not that big, and roles and responsibilities are not that well divided as in a mature company – things grow and change too quickly. The problem of growth and scalability is inherent to all startups, and that’s where a reliable tech partner comes into play.
Outsourcing Software Development for Startups
In a fast growing tech startup, you cannot have all specialists that you may happen to need. Also, you can hardly scale your team up and down as quickly as the development process requires. All these circumstances make outsourcing software development to a reliable tech partner very beneficial for a startup. As some entrepreneurs point out, 74% of companies outsource IT. That is used by new and mature companies as a way to increase a company talent pool, get access to required technical and/or managerial expertise, and save on employment costs. Moreover, even the most high-standing companies outsourced software development, including Google, IBM, GitHub, Opera, etc.
A good idea for an early-stage startup in search of their market fit and, correspondingly, with instantly changing focus and tasks is to hire a dedicated team (we discuss dedicated teams in detail in this article). There are many software development companies for startups to choose from, but if put in a nutshell, just make sure that the supplier you chose has experience of working with startups, has scalable approach, and a wide range of services you may need. The latter will save you the trouble of looking for dozens of suppliers for each type of work and communicating all of them together.
Find out about our options of building dedicated software development teams
Having a supplier that knows how to work with startups and understands their needs grants more benefits. For example, they may have special startup-oriented services and offers, such our CTO-as-a-Service. So, it’s a good idea to start looking for a software development firm to support your startup among those having experience of working with such companies.
Sigma Software initiating Ukrainian Tech Days in Israel
Sigma Software is organizing Ukrainian Tech Days in terms of OurCrowd Global Investor Summit 2020 (Jerusalem), one of the leading startup events in the world, on February 11-13. For one week in February, the startup world gathers in Jerusalem for the OurCrowd Global Investor Summit, one of the premier events in the tech industry, and the largest business conference in Israel. In 2019, over 18,000 people from 189 countries registered to attend what has become the fastest-growing tech conference in the world. Entrepreneurs, venture capitalists, corporate executives, investors, and others came to the Innovation Nation to meet, learn, do business – and discover the most historic city in the most exciting country in the world. As Forbes reported, Summit Week in Israel was “the place to be.”
Our team is always happy to meet new entrepreneurs and share our best practices of helping startups to grow faster. As well as to show the world tech potential of Ukraine, a region with 200 thousand tech specialists and 110+ R&D centres of the leading tech enterprises, good IT service companies, promising startups, and product companies. This is why we initiated Ukraine Tech Days in Israel at OurCrowd. Together with other prominent companies - Ciklum, Shalb, Beetroot, InDevLab - we will run the set of events dedicated to delivering high-level software development services for startups.
What’s included in Ukraine Tech Days? There are three days in Tel Aviv and in Jerusalem. A meetup on February 11, a part of OurCrowd official program, that will gather around 100 startup founders. Meetings of the participants on February 12 with Israeli companies interested in cooperation. And Ukraine’s stand at OurCrowd Global Investor Summit on February 13.
Ukraine Tech Days by Sigma Software is a good opportunity to unveil the potential of Ukraine, to get new connections, and partnerships.
Join us at the meetup, ping us if you want to meet with the participants at separate meetings, and/or visit Ukrainian stand at the OurCrowd Global Investor Summit in Jerusalem on February 13. More details on Ukrainian Tech Days in Israel are here: https://www.facebook.com/events/1831630260302617/
Register to GROW WITH UKRAINE meetup at OurCrowd week: https://www.eventbrite.com/e/grow-with-ukraine-ukraine-meetup-ourcrowd-week-tickets-91752511231
The initiative is organized by Sigma Software with the help of UTEW Tech Tribe community, Ukrainian government institution Export Promotion Office, European Business Association, and Global Israeli Initiative, backed by USAID & USAID Competitive Program.