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10 reasons your tech startup is a non-starter

October 24, 2013 • Lists, Top Stories

There are reasons why a technology startup could be viewed as being a 'non-starter'. (Image source: Shutterstock.com)

There are reasons why a technology startup could be viewed as being a ‘non-starter’. (Image source: Shutterstock.com)

Entrepreneurs behind technology startups may be champing at the bit to get going, but before they bolt into Africa’s wide open technology market, they ought to consider whether they have what it takes to even compete.

At Intel Capital’s annual CEO Summit, being held this week in San Diego, California, there has been intensive discussion around startups and exposure to funding opportunities, catching the attention of venture capitals and the like.

Intel’s leadership confirmed that when considering candidate companies for investment, they look for companies that disrupt something in the market or create something truly unique.

There has also been reference to Africa’s ability to leapfrog and lead from the front in certain instances, for example in mobile payment infrastructure.

ITNewsAfrica has previously published a list of the top reasons why African tech startups struggle, which covered details of the realities facing these startup ventures.  With this list, we have focused on setting up a viable venture in the first place and what may be perceived as being a non-entity before it has actually begun to operate.

So before entrepreneurs out there pitch their ideas, showcase their ventures and try to attract the attention of potential investors, we have engaged experts (such as Brian Pinnock, GM for Innovation at Internet Solutions’ ISLabs, as well as Amolo Ng’weno, MD at Digital Divide Data Kenya Ltd.) who deal with tech startups and business incubation on a regular basis and used their responses to draw up a list of the most likely reasons a tech startup could be a ‘non-starter’.

These reasons are ranked in order of priority, based on discussion with industry representatives.

1. Over-selling idea, under-selling people. Almost all startups seem to focus on their big idea (which is obviously an important component) but we take a very close look at the team behind the idea. You can almost immediately tell the get-rich-quick types who think their idea will carry them (these are usually the people who want you to sign a non-disclosure agreement) from the laser-focus types who demonstrate a single-minded dedication to making it work. We sometimes refer to it as choosing the jockey (people) rather than the horse (idea). You can’t always tell who will succeed, but you can usually tell who will fail. The quickest way to annoy a potential venture capitalist or a corporate social responsibility organisation is to ask them to sign an NDA. In most cases they will simply pass on your idea.

2. Outsiders. There are exceptions to this, but usually a team whose background is from entirely different industries does not have good prospects when trying to disrupt an unfamiliar industry. There are often subtle structural, legal, competitive and other issues that are the reason for that glaring gap in the market. A team that has a background in the industry and is aware of the pitfalls and the soft underbellies of the market leaders are usually better prospects.

3. Lack of understanding of the market. Closely related to the above, but there is still a dangerous mindset that exists – the ‘if I build it, they will come’ notion. Many tech products simply do not have any market at all and many others wither for lack of marketing and sales effort. You only have a business if people are willing to actually pay money for your product!

4. Me-too idea. While it is sometimes a good idea to take a concept that has worked in another market and bring it to Africa, an almost sure sign that a startup is heading for failure is if they assume that the same market structure, market dynamics, taste, and broadband-use patterns hold in Africa as they do in say the USA or Europe. People tend to forget that startup success comes from solving a problem, so simply copying an overseas startup is starting with a solution to a problem that may not manifest in the same way. If the same problem does exist here then a copy-cat solution is only a start. One needs to confirm if this idea solves a meaningful problem in a way that will work here and that will ultimately scale. Lastly, what is stopping the original company from competing the in Africa? If the answer is just time or market size, then the copy-cat startup is usually a non-starter.

5. Vapourware. In other words a product that takes too long to develop or get to market. There is little that can be achieved if the solution proposed has missed the boat before even getting to the market!

6. No development skills. Too many would-be entrepreneurs believe that they are the ‘ideas-guy’ and the ‘business-guy’ and that all that is required is a team of generic developers to make it work. Not everyone in the startup team needs to be a developer, but a lack of strong development skills in a startup is almost a sure sign of a non-starter.

7. ‘Jack-of-all trades’ syndrome. Another very important reason is the founder behind the startup believing that just because they are a tech genius, they are also a marketing genius, a finance genius and generally management genius. They under-invest in these roles and are not willing to hire or trust other people to take them on.

8. Poor communication skills. An entrepreneur is going to need to communicate on so many different levels that a lack of communication skills in their leadership is a strong sign of pending failure. A startup needs to network with potential funders, potential clients, industry peers, their own team and staff and suppliers. On the flip side, we have seen several apparently mediocre ideas get funding and traction based largely on the strength of personality and strong networking skills of an individual in the team. This allows the team time to refine and possibly pivot if necessary.

9. Unrealistic views of their initial value. There has been a great deal written about early stage funding in the world in general and the need to bootstrap as much as possible before looking for external sources of seed capital. But if seed capital is required, then the one characteristic often seen is startups using Silicon Valley as a yard-stick for their potential valuation in Africa. This is a sure road to both disappointment and a lack of interest.

10. Lack of capital and an unrealistically optimistic business plan. This is harder to avoid or escape, despite the increasing numbers of investors willing to invest in the African tech space. For entrepreneurs: it will take twice as long and cost twice as much as you expect.

* Image via Shutterstock

Chris Tredger – Online Editor

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