WHY TECH BUSINESSES DIE TOO YOUNG

I watched a video of a young man who, full of passion, went to pitch his business before the Lions Den. And while he had a fantastic product, his passion made him lose the pitch. Man was too passionate to calm down and even listen to the investors.?

In my opinion, he represents a lot of tech startup founders and innovators who have great product, and are very good at what they do, except that they forget it takes the art of a business and the business of a business to make a real business that will not fizzle out in the first 5 years.?

About nine Nigerian startups that collectively raised over $70 million in the last two years have shut down in 2023. (Source: Nairametrics). According to statistics, 2024 is not looking any better.

Let’s talk about some of the reasons why tech businesses die too quickly.?

Why tech businesses die too quickly.?

Product Fit

Before you get defensive about your product and the market you are trying to serve, hear me out. Your opinion doesn’t count when it comes to finding a market for your product.?

By the way, you don’t find a market for your product, you find a product for your market, and this is where a lot of folks miss it. I get it that your app has wonderful features that your competitors' app doesn’t, but what if the problem is not about the features but the app itself??

I did research on the use of apps recently and you can see the outcome for yourself.?

But yeah, while tech business is not always about creating an app, whatever your tech startup is all about, how many people out there want it and how many need it??

Here’s a little secret about the most successful businesses in the world. It will shock you what they spend the most of their money on. It is not production, and it is not marketing.?

Amazon spent over 73 billion U.S. dollars on research and development in the fiscal year 2022. Meta, Alphabet, Apple, and Huawei rounded out the top five of companies with the highest Research and development spending that year.

Why would these top brands rather spend more on research? Very simple. Research helps you in two ways:

1. Relevance: You don’t want to wake up one day and you are no longer useful to your target audience simply because their taste bud has changed and your services haven’t. I mean having a great product is good, but Nokia has taught us that people’s desires and needs change and we have to grow and change with them too.??
2. Staying ahead: How do you stay ahead of your competitors? By knowing what they don’t know. Why is knowledge this important? Because knowledge is sight. There’s only how far you can go with your eyes closed. No matter how much you master the corners of your house, you can’t run around it with your eyes closed.?

Does that mean spending more on marketing or production than on research is wrong. Well, yes. Look at it from this angle. Would you rather pump money on the same thing you have been doing before or invest it in what would make you grow, and keep you in the game?

I started working on an app for a while now, and I am still at the research stage. Research is the steel you plant on the ground while laying the foundation of any tech business. But it is also the steel you use while raising the building, and the steel used to keep the building going long after you are done building. Get this and your foundation and pillars would remain unshakable.?

Uniqueness fit

I’ll quote Auren Hoffman from Quora. Many start-ups try to be 0.1% of a fifty-billion dollar market rather than 50% of a $100 million dollar market. Of course, both numbers equal $50 million in revenue but the company that has 50% market share turns out to be much more valuable because it is much more important to its industry.

Being the winner in a very small market is much more important than being a small minnow in a giant sea. Being the big fish in a small pond gives you more ability to innovate and you become really important if a larger player wants to get into that pond.?

It’s okay to be tempted to have a bite of the big market. But here’s a secret: marketing yourself and getting recognition in the market ia faster and easier than trying to sound i?

Founders fit

So I listened to Mr Iyin Aboyeji, co-founder of Flutterwave and Andela, speak from an investor point of view. He said some angel investors believed in a product because it was well sold to them by the founder, and they proceeded to invest.?

The moment the money entered the founders account is that moment the founders realised they need a car, a house and a certain level of comfort. Their lifestyle changed. On the other hand, the investors' prayer shifted from 'May this investment yield a good return on investment' to 'May I at least recover my principal, even if it's just half of it.' Sounds funny right? Well, it's a stark reality.

Here’s another angle why tech businesses The investors on Shark Tank are often thrilled when they hear backend stories of what actually drove founders to start the business.?

So, Founder A wants to start a tech enabled borehole in rural areas because he grew up in one where lack of water and poor water condition has affected the community and even led to some complications for pregnant women, inclusive of a relative of his.??

Founder B wants to start a tech enabled borehole because his research showed? him that many rural areas lack water supply, and he once went to these rural areas and saw for himself.?

Both of them found the same problem, both of them have the same solution to this problem, but who is likely to keep trying to bring this solution to limelight years after, even if they don’t get the support of investors? Rafe Furst (Quora) said, Great founders figure out a way to operate without capital until they can generate more, either through investment or revenue.?

Other times, it may not be about just the passion for your business, it could be resilance. Some founders quit too early when they are faced with one or two challenge. Nobody wants to hand over his money to a vision that is easily shaken by challenges. Now these are among the things investors look out for because one of the pointers to businesses that would survive and thrive is what drives the founder(s)?

Overconfidence:

When business owners, founders and innovators think of their businesses, oftentimes they dream a lot about how successful it will be within the first few years. They are always caught by surprise when the business fails to make profit in the first 1-2 years of starting out. In other words, they prepare more for its success, and less for its losses.

Amazon launched in 1994, with focus on growth. They invested heavily in infrastructure and expanding product offerings. This strategy resulted in operating at a loss for several years until the late 1990s when Amazon started making profit.

Tesla began in 2003 with pouring resources into electric vehicle research and development with no profit until 2020. Shopify started in 2006 and focused on establishing themselves as a leading e-commerce platform provider, which required investment and wasn't immediately profitable.

Uber launched in 2009 prioritising rapid growth and user acquisition over profitability in its early years. They heavily subsidised rides to gain market share, leading to significant losses - up until 2018.

I could go on and on, but take this from someone like me who is focused on solving funding issues for innovators: Investors would trust you more when you tell them your business is not going to be profitable in the first 3 years more than when you give them a billion reasons why your business would make profit in the first 1 year.?

That said, have a good business plan that gives you a financial projection with realistic forecast so that while you might not be able to foretell how successful your business will be in the next five years, you can at least project based on where you business is coming from so far, where it currently? is, and where it is going based on the current capacity you have.?

Poor execution?

Quibi was a mobile streaming platform tha focused on short-form shows under 10 minutes. While the idea tapped into changing viewing habits, Quibi's execution had problems. The content library was small at launch, there was confusion about its purpose compared to existing platforms, and the requirement for a data plan discouraged users.

There are two layers to the execution I want to dwell on:?

Technical execution: It’s easier to describe execution by mouth until you get to work. It is almost impossible to figure out everything before execution. As you begin execution, you will begin to discover technicalities, structures, and styles that need to be revisited, updated or replaced in the process.

But even at that, surround yourself with smart people especially in other fields who can objectively criticise and ask the right questions to avoid avoidable surprises in future. You may be the best in the technical side of execution, but if you don’t have someone handling the business side of it, then you will be forced to play both roles which leads to poor execution in the end.

Execution also involves marketing plan. Having served in the marketing niche for over 7 years, I can tell you for free that I have seen great businesses that ended in the marketing phase as a result of poor knowledge of positioning and marketing for their target audience.

One of my funny experiences is when a brand's marketing budget is $100 dollars, but they want to market and sell over $1million worth of products. How do you solve these problems? Find everyone who is good in their own field, and let them execute according to their expertise.

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I was about touching on Finance and other key factors but the article was getting too long, even for me. Lol. So here's my contact. You can reach me if you need more, or perhaps you need some consulting service with your tech business. See you on the other side.

Istifanus Sarki,

Strategist

Call/WhatsApp: +2348137884995