In a tech startup you can reach a point where your efforts bring diminishing returns. For all the hard work you put in, your customers just won’t bite. That leads to a death spiral, which is worse than failure.
Related: Do You Recognize the 8 Early Warning Signs of a Failed Startup?
You can jinx your startup in a thousand different ways. But the following three lie at the core of many others.
1. Wrong customer segment
Chasing the wrong type of customer makes entrepreneurship unnecessarily difficult. When you hit the gas and brake pedals at the same time, you might pick up speed, but everything you do suffers from useless friction.
Successful entrepreneurs pick customer segments very carefully. When I interviewed Evan Macmillan, founder of conversational artificial intelligence company Gridspace and cofounder of Zappedy (sold to Groupon in 2011), he told me:
“A lot of companies struggle because they go after consumer problems using far-fetched technologies. Then there’s the double risk that the tech never delivers on the promise and that it doesn’t meet the whims of consumer taste.”
Hence Macmillan serves enterprise customers. Could he make his software create value for consumers? Possibly. But with technology risk, targeting consumers comes with a price tag.
Manish Kothari is a successful entrepreneur and president of ventures at SRI International, a major research institute spun out of Stanford University. Kothari routinely selects tech startups to invest in and support. In an interview, he shared a valuable conclusion: “If you’re doing a tech play, you need to have a large, accessible market, plus sustainable and frankly massive differentiation — because the investment required is higher.”
So over to you, tech entrepreneur. Do you have a significant market and an incredible way to stand out? If not, better make sure you’re aiming…