3 hard-to-hear things about running a Tech Business
So, here's the scenario. You're a tech person, and you decide to start a tech business. You can build the best and coolest tech IN THE WORLD, but there are still so many things outside of the tech that you need to be successful. And many of these things are not about the tech AT ALL. So, we've captured 3 things about running a tech business that tech people will likely hate hearing. But guess what? It's all important.
All 3 of the topics have a common theme of building relationships and talking to people - which is not something that comes naturally to a lot of people in the tech community. It takes times to build and maintain relationships, and you need to be able to focus on what's serving you and your business, and how you can serve others on a similar path!
#1: Cash is King
When we think of a tech startup, we don't often dream about managing finance. We dream about building things that are transformative for customers. We dream about innovation, advancement and creating a workspace we love.
No one likes to talk about money. We often hear success stories for companies that have grown into industry giants and they tend to skip over the hard parts in the early stages. If Founders do talk about hardships, it's typically personal sacrifices, like moving in with their parents to save money or putting their savings into their business. These are often quick statements that are bookends for the big success story of "look at me now!"
For failed businesses, 90% fail due to cash flow issues.
It's hard to manage when your resources are very limited. If you sell products, there's a cost to building and bringing that product to market that typically needs to be paid before you can sell your product. If you sell services, you may not have a reliable sales funnel that allows you to grow and scale with your limited resources. Many businesses' cash flows rely heavily on customers paying on time, and if 1 or 2 accounts get stale, the entire business operations can be impacted.
We're not trying to scare you, we just think it's important to be hyper aware of the financial stress that new businesses can experience. Growth is difficult and feels risky when you don't have a lot of "runway" (which shows how many months you can operate with the cash you have). It takes guts to be a business owner and take on these challenges... which is why entrepreneurship is not for everyone!
Obviously, in the tech startup space, raising capital from investors - Angels, Venture Capitalists, Institutional Investors - alleviates cash flow issues. If you go this route, you often end up continuously raising more money to give your investors exit opportunities, so you need to ensure your cash flow supports the growth you need to meet your goals and targets that your board and investors require.
Our best tip for managing your cash is to see if there are grant or funding opportunities that are "non-dilutive" (which means they don't take equity or ownership stake in your company) that can help you stretch your dollars. At the bottom of the article, we've included some of the programs we've used in our business and helped our clients use - specific to Ontario, Canada. To find funding programs, it's best to network with other founders in your area, or business groups or accelerators to see what's available. Check with your local post-secondary institutions about programs specific for student hiring. You can create great opportunities for students and have it be cost-effective, which is the ultimate win-win! Most of these programs require you to have matching funds and reimburse you as you work on your project.
Our bonus tip: make sure you have a bookkeeper who keeps your books up-to-date and accurate. This is vital to making decisions, managing cash and being able to provide information to funding programs.
#2: Technical Success ≠ Business Success
No technical founder wants to hear this, trust me. We all want to spend our time building and solving technical challenges. But business is so much more than that. It takes strategic sales, marketing, operations, customer success and more! We can't rely on a "if we build it, they will come" approach to the marketplace. And we can't wait until our tech is built to start executing on sales, marketing and customer experience plans.
For us, when we work with companies to build products, we're not simply building the tech to specs. We work with business operations teams to make sure the business model and market validation plans are in place to set the tech up for success! Because our client's success in the market means more budget to build more tech, grow teams and ultimate build viable businesses!
Since we're in the heart of Canada's tech startup ecosystem, we've seen a lot of business ups and downs. We've seen companies build the coolest tech solutions but have no market for it. We've seen good products fail because of poor sales planning or operationally-heavy go-to-market plans. We've seen amazing products be in high demand from customers but not be able to manufacture and scale quickly, only to be beat out by competitors.
To combat this hard truth, we use a 3-legged stool analogy. Imagine the stool is the business and each leg is a key function: technology, revenue and operations. The stool with one leg simply won't last. The stool can work with only 2 of the 3 legs, but it won't feel stable unless it has all 3. These don't always need to be 3 different people, but having strong leadership across each of these functions is critical.
Here's a typical breakdown of the 3 legs - not every company fits this mold but it's a starting point. The technology leader focuses on building the product, advancing the technology, roadmapping, IP and growing the technical team. The revenue leader focuses on the path to revenue through sales (and often marketing), go-to-market strategy, strategic partnerships/relationships and product-market fit. The operations leader takes ownership of marketing operations, finance, legal, customer success/support and business operations.
And remember, in the early days especially, outsourcing is your friend! Finding a good accountant, budget-friendly legal support, bookkeeping, etc. can help you focus on what's important.
#3: It Takes a Village
It is very hard to build a business in a bubble. In our local tech ecosystem - especially since COVID-19 lockdowns - there are so many people who are building their business from their home, isolated from the world. That's a very lonely and difficult path.
Building a community allows you to surround yourself with people who have been through challenges, who can help give you advice on your journey. It's much more efficient to learn from someone else's failures than to fail yourself! Sometimes just knowing that others have been where you are and survived can make a huge difference. A community of entrepreneurs, especially in a similar industry like tech, will give you support and cheer you on.
There's another very important community village you should also be building up as you build your business: a customer community. Even early on, try to find groups of people who would be in your target market in a forum where you can do market research.
When we built our BOWdometer product, we had several communities that were GAMECHANGERS for us. We ourselves weren't serious archers, but our Advisory Board was filled with passionate members of the archery community. Here are 4 types of communities we built and how they impacted our journey:
Beta Testers: our local archery community was eager to work with us to help us test the product, give feedback on it in the early iterations and help us with marketing, market validation and product features. We went to local league nights and competitions to chat with them about any ideas, strategies and it truly shaped the final product we launched. Our product beta ran for 4 months and had 100 local archers in it.
Brand Ambassadors: once we launched commercially, we created an Ambassador program that gave archers around the world the opportunity to apply to get a free BOWdometer and they became our global sales, marketing and product showcase team. It helped us also bridge some language gaps as people could chat with archers locally about the product in their native language - something we didn't have budget to support!
Social Media: once we launched, we built up a social media presence that people wanted to belong to, including active post sharing, achievement challenges and a private Facebook group that created community for BOWdometer owners around the world. They would help each other if they had questions about the product and we often gave our BOWdometer Nation group early access to features, customer interviews and product launches! That kind of exclusivity is gamechanging for brand building.
Online Community: one market we really needed to understand better was North American bowhunters. We needed to find a way to reach them separately from our brand itself. We literally built a Facebook page filled with hunting/archery themed material (mostly memes) and used it as a way to subtly learn about that demographic. We were fortunate to build up a community of over 14,000 bowhunters that gave us access into that market for research, marketing and A/B testing!
These are just a few ways you can build up a community, especially if you're building a consumer-facing product. Crowdfunding is a great way to create a community and once you've got them, keep them involved and part of the process and they'll show as much pride in the end result as your internal employees!
(These are mostly specific to Ontario, Canada):
Canada SR&ED (R&D tax credit): https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program.html
Canada NRC-IRAP (commercialization reimbursement): https://nrc.canada.ca/en/support-technology-innovation/about-nrc-industrial-research-assistance-program
Communitech (tech accelerator): https://www.communitech.ca/
Communitech Peer 2 Peer Groups: https://www.communitech.ca/start-and-grow/yourself-and-your-teams/peer2peer.html
Fierce Founders (Female-identifying Founders): https://www.communitech.ca/how-we-help/fierce-founders/
Accelerator Centre (accelerator): https://www.acceleratorcentre.com/
Ontario Post-secondary Student Tax Credits: https://www.fin.gov.on.ca/en/credit/cetc/
Canada SWPP (Student Funding): https://www.canada.ca/en/employment-social-development/programs/student-work-placement-program.html
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