The early demise of 70% of startups, whether due to misreading the market or running out of funds, has been well reported over the last 20 years. It’s a familiar story that seems to repeat itself daily. Hot new tech firm with the trendy name and attractive IPO secures seven-digit funding. The company then continues to develop a healthcare or financial industry platform that aggregates siloed data, using AI to provide insight and improve efficiency and fast track informed decisions. Or the fledgling software company creates a B to C application that will revolutionize retail for consumers as we know it. We all know about the tech startups that boom and bust, but what about the ones that simply don’t grow?
Though not as dramatic as shutting down, startups that plateau early and stay small are just as common and often share a fate just as permanent as their defunct counterparts. As Dharmesh Shah, CTO and Founder of Hubspot aptly tweeted, “As a startup: At first you fight death. Next you fight stagnation.” There are a number of reasons why this happens. Most are self-inflicted.
The old adage “working in the business instead of working on the business” is steeped in operational tradition. If focusing on innovation is the road less traveled, getting drawn into the administrative minutiae is the path of least resistance. Busy work has a gravitational pull. It’s easy to think getting one more thing off your plate will eventually free up innovation crunch time, but it rarely works out that way. Below are some internal roadblocks that keep tech startups from finding their second gear.
Wearing Too Many Hats
With any startup or small business, specialized roles are simply not an option. The problem is when personnel spread themselves thin, their daily duties may have mixed results. It all depends on how startup staff prioritize revenue generating tasks and align them with the skill sets. Ideally, developers should develop. Salespeople should sell. And support staff should document known issues along with client feedback for ongoing improvements of the platform. While startups often consider multitasking the noble attribute of a team player, it can be counterproductive to growth.
For example, when salespeople become customer service reps to backup or provide oversight for the support team, they’re not going after new business. When developers toggle between coding and support tickets and emails, the new and improved version 2 of the platform goes on delayed release.
“We Got This” Syndrome
It’s no secret that tech startups hire tech savvy staff. So why not have them handle everything IT related? Startups that insist their staff have the technical chops to incorporate internal IT support with software development or client facing activities are missing the point. The real question they should be asking is “can we afford to use valuable coders for client support?” While it’s likely no one knows the product better than the coders that built it, focusing on additional features or fixing glitches are more likely to benefit long-term growth. Additionally, coders may be too close to the product to accept and share critical feedback with management.
To avoid a feedback echo chamber, startups should consider using an unbiased third-party support team. Seeking candid client input about the product should be more S.O.P. than C.Y.A.
The same goes for internal customer IT support. Techs with a long list of credentials after their names (MCSD, AWS Developer, OCP, etc.) can likely handle a password reset or wi-fi access issue. And if they work alongside HR, accounting, or other non-technical staff, they may get shoulder tapped into support tasks faster than they can say “did you submit a ticket?” Being in perpetual growth mode means losing the churn that gets in the way whether that’s via outsourcing or adding internal support teams.
Scalable Tools, Infrastructure, and Security Measures
When most startups talk about scalability, the emphasis is mostly on people and processes with technology placing a distant third. While network bandwidth may have been sufficient at launch, startups that add coders before preparing circuits and wireless networks for the increased traffic may inadvertently throttle down their productivity. Any startup that stores legal documents, financial data, or Personal Healthcare Information (PHI), has to consider data storage and security implications of keeping the technology infrastructure status quo.
Is the organization dealing with latency issues when processing massive file transfers for corporate clients? How up to date are antivirus tools at the device and network level? If the startup is handling any kind of secure client data off site at a data center, what are vulnerabilities? Does the data center conduct penetration testing or have physical and logical access controls? Any startup that’s application focused may not necessarily be the network assessment and risk management experts. Still, if retaining core clients is worth leveraging a proactive network cybersecurity partner, that ounce of prevention may be a worthwhile investment. Often the best growth strategy starts with holding on to what you’ve got.
From Innovation to Administration
Sometimes inertia is cloaked in procedure. Startups launch and secure those core accounts or beta clients and then go right into business as usual. It’s the default setting when undefined growth initiatives seem insurmountable. For whatever reason, post launch, many startups begin to act like established businesses. They forget to have development, executive, and marketing teams brainstorm on a unified message. Or they slow the cadence of business development huddles and put less emphasis on action items and follow up. Startups that go through a sophomore slump often do so because each job function becomes compartmentalized. That interactive team energy ossifies. Workloads become more about documentation and less about pivoting on a dime. Staff spend more time describing their tasks than executing on strategy.
Obviously, the goal is to keep the early stage startup momentum going. But that’s easier said than done. How do you inject that same energy, focus, and innovation that created that Phase 1 buzz in the first place? When startups can’t invoke that enthusiasm culturally or give it a procedural shove in the right direction, the next plateau can feel unattainable. Culture may eat strategy for breakfast, but unless you can offload the busy work, where that impetus comes from won’t matter. Again, easier said than done.
Putting it simply, startups need to identify what’s most valuable for their clients and deliver on that daily. Employee action must reflect that core mission. Whether it’s refining your platform or adding features, there should be a constant feedback loop in place for customers and prospects. Internal communication should fixate on product knowledge share, how it benefits clients and prospects. The external messaging must be unflinchingly about them. That’s how successful tech startups get beyond the starting point. Staying put is not an option.