The technology start-up sector continues to grow and play an important role in U.S. economic prosperity – contributing to innovation, productivity and competitiveness. But the harsh reality is that, according to CB Insights, 70% of tech start-ups fail. And consumer hardware start-ups fail even more frequently, with 97% ultimately dying or becoming “zombies.”
So what is it that separates the winners and losers in the tech sector? Is there a winning formula? And how can you increase the odds in your favour?
Research by CB Insight analysts discovered that nine of the top 20 reasons for start-up failures, and five out of the top 10, were related to customers – not meeting customers’ needs, not listening to them or even ignoring them. In fact, the number one reason why start-ups failed was “no market need.” In other words, there was no customer.
But how do you find the customers who are going to buy your products, when will they buy – and at what price and in which volumes? It’s a bit like solving a jigsaw puzzle. The fragmented pieces of markets, products, promotion and sales all need to interact but can appear disjointed, disconnected and impossible to fit together.
As with a jigsaw, the best place to start is by finding the edge pieces – particularly the corner pieces – to give the size and shape of your puzzle. Define the frame by identifying your opportunities early in the product definition phase.
Timing is Crucial
Avoid developing new products that need to go into new markets – this is ‘no man’s land’. Better to sell existing products to new markets or new products into existing relationships. And think about what problems you are solving in your chosen market – no problems means no requirements for new products. Ensure you can answer the question “why?” – why would anyone buy your product, why are you doing what you’re doing, why would anyone care if you went out of business?
Timing is also crucial. Market and product life cycles are not the same – markets in different cycles will adopt products in different ways. Defining opportunities is not simply aligning products to applications but aligning the maturity of your offering to a particular market stage. Also, bear in mind that market segments are not always what they appear to be. Aim new products at existing target market segments/customers and then get ready to adjust your aim.
The next step is to sort the remaining pieces of the jigsaw by colours and themes – this will help you build an understanding of why winning a piece of business with one customer, for example, could lead to a number of similar wins. Once the grouping of similar target customers is complete, you can start to put the pieces together one section at a time.
Identify the Source of Pain
There will typically be a particular source of “pain” for each customer group. Once you’ve identified the source of that pain, sell a solution to the pain – customers will buy pain relief well ahead of vitamins. If there is no pain, it’s unlikely there is a problem or any urgency or budget – and a sale is therefore also unlikely.
Avoid chasing squirrels. Look for the bears – the market leaders. If you get the leaders to adopt your product, the rest are likely to follow. But don’t confuse early adopters with general market adoption of your solution. If a potential client doesn’t have dates for the release of their product, they are unlikely to be ready for a general launch.
In every meeting you attend, you are either pitching or being pitched to. Get to the bottom of what you are being told and why. And develop a collaborative approach. Avoid getting into an arm wrestle negotiating price and terms – at that point you’re not closing but likely only providing ammunition for the buyer to use against the competition.
It’s also important to use a systematic approach to sales – in complex markets you need to guide sales to a successful close, rather than just tracking progress. Put a system in place to ensure you don’t drop the ball. This will also help you spot patterns that emerge from your efforts as you move opportunities from one stage to the next. You will be able to track when projects are stalling, for example – and quickly spot if all projects within a specific vertical stall at the same point. A system will enable you do the analysis you need to ensure you are focused on the right opportunities at the right time.
Finally, when all the pieces are in place, you should start to have a clear view of the big picture and be able to re-use your learnings for the next puzzle. You create for yourself the opportunities for growth – and you have a fighting chance of avoiding the curse of the missing piece of the jigsaw.
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