5 Reasons Most Tech Startups Fail

September 2, 2014

4:30 pm

Starting and maintaining a business isn’t easy, but starting and maintaining a tech company is something else altogether. A study conducted by Startup Compass found that over 90% of all tech startups fail. In this article we take a look at the top 5 reasons why.

zune v ipod

Even tech giants Microsoft have had their failures.

Market Decline

The tech industry moves at a very fast rate and would could be in vogue one month could be completely out-of-date the next. For this reason tech products often have a very short lifespan; far shorter than it takes to establish a business from the ground up. Many tech startups find that by the time they acquire funding, find a suitable manufacturer, get distribution and start trading, their product is already irrelevant.

Poor Tracking

Tools such as Google Analytics allow businesses to tack everything from where a customer found their website to their duration of stay. Web analytics can be used to track marketing efforts to find out what activities generate the biggest financial return. Companies that don’t use this data are automatically at a huge disadvantage. While tracking alone won’t make or break a business it can be used to pinpoint flaws and make changes before they cause serious problems.

Too Formal

The formal image is old and boring. Now that sleek and flashy companies like Apple dominate every corner of the tech world, the corporate shirt and tie methodology is no longer considered “cool.” Fundamentally people like doing business with people and the casual approach is far more personal. Many new tech companies fail because they try too hard to brand their company in a formal manner rather than really thinking about their audience and what type of person they’re targeting.

Poor IT Infrastructure

No tech company can survive without a top quality IT setup and support team. A computer with Internet access won’t cut it anymore. Nowadays businesses require an entire infrastructure built from servers, networks, computers, workstations and handheld devices. The technical prowess that’s required to set up such systems is highly advanced; therefore, successful startups often outsource the work to specialists. According to Cheeky Munkey, these IT support systems can do far more than streamline business activities; they can also provide state of the art Cloud based security.

Lack of Fresh Ideas

Failure certainly isn’t the word that comes to mind when you think of Microsoft, but when they tried competing with Apple’s iPod in 2006 with the Zune they were driven out of the market almost immediately. Microsoft even had the license agreements with all four major record labels, but that still wasn’t enough. After being on the market for two years a mere two million units were sold, whereas over 197 million iPods were sold in 2008 alone. In October 2011, after numerous failed attempts to capture the iPod market, all Microsoft Zune hardware was discontinued. What does this story prove? Fresh ideas are crucial.

The tech industry is definitely one of the hardest to break. Expert futurists state that the tech world will change more in the next 20 years than it has in human history. While exciting times are ahead, only the minority will have the stomach and business aptitude to take things to the next level.

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I\'m James, I live and work in Hertfordshire (just outside London), I have a cat and live with my wife. I am a self-confessed geek and spend my days online primarily for both work and pleasure.

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