Why tech startups fail: Top challenges they face and how to overcome them

By @chelean on
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FILE PHOTO: An employee of French National Agency for Employment (Pole Emploi) works simultaneously on French and German agencies for employment internet sites, at the joint German-French job center office in Kehl, Germany, on the French-German border near Strasbourg, November 13, 2014. Reuters/Vincent Kessler/File Photo

Many startups find it difficult to get their business off the ground because of the many challenges that come with it. Several success stories heard from companies that are now big names in various industries, along with step-by-step tips available online, make it look like it is easy to build a business. However, the truth is that the road to success is never easy. Understanding the kindĀ of problems you are most likely to experience will prepare you and give you a better chance of making it through.

Here are the top three challenges most tech startups encounter:

1. Raising capital for the business

Money is one of the most important things a startup needs to sell a business idea to a certain market. You need funds to build a prototype of your product or service, and to sustain your business once you get it started. A Silicon Valley Bank 2017 Startup Outlook Report says that raising capital continues to be a challenge for most startups regardless of which country they are in, via Cloud Employee.

To address this, explore the possible financing resources you can get. Aside from getting a bank loan and using some of your savings, you can try crowdfunding or leverage programs that attract angel investors. One company that helps startups expedite raising capital is Digital Arts Media Network (OTCMKTS:DATI). Using their Public Accelerator Incubator (PAI) model, the firm helps address the issue of funding access for both startups and investors. Many startups do not have access to investor resources committed to the actual development and growth of a company. More so, many investors also do not have access to the startup community and they could be missing out on the opportunity.

Digital Arts Media Network offers specialised accelerator services such as Angels+ (a proprietary strategy), as well as crowdfunding, Initial Coin Offerings (ICO) and Token Generating Event (TGE).

2. Building a strong team of talented people

For a startup to succeed, it needs a great team that gets things done. Most founders do not have the very skill needed to develop a product or a service. The lack of skills can be addressed by hiring the right people with talent, although chances of success are higher when the founders pick the industries where they passionately excel in.

Founders should spend one-third of their timeĀ building the core team and hiring people who are best in what they do, according to Joe Thornton, Head of Talent at Playfair Capital. In addition to having the right knowledge and skills, the people you should bring in to the team should share your vision for the company and the values you stand for.

3. Creating business traction

Another difficulty startups often encounter is getting business traction. Without traction, it would be harder to attract more investors and compete in the market. Companies usually rely on customer response and revenue to measure business traction. But no matter how great your idea may be, the truth is that customers are often reluctant to try new products and services from a company that has no proven track record yet.

To create traction, experts advise going out to find customers who will try your products instead of relying on ads and posting links on social media. Build an inexpensive but impressive prototype of your product or service and manually recruit people who will experience them. This will lead you to customers who will eventually demand your products or services. Airbnb CEO Brian Chesky said you should start building your business one person at a time, focusing on a small number of people who will love what you offer and will recommend them to someone they know.

Article from a press release sent for consideration.