Issues that commonly occur in Tech Startups

Startups are difficult at the best of times, but there are some issues that are unique to the world of tech startups. We have broken these into two sections, financial viability and strategic advice.

Financial Viability

Most small businesses struggle with cashflow, and we know that the number one reason for early business failure is the inability to get on top of cashflow. We recommend that you carefully evaluate the financial viability of the business. Starting with the monthly cash burn rate. What are the existing overheads of the business and expenses that need to be taken care of. How much cash are you ‘burning’ through each month.

Related: Startups: 7 Ways to Stay on Top of your Cashflow

On the back of that, what is the company’s runway? What is the amount of time that the business can burn through their cash and still stay afloat? If you are burning through $50,000 a month and you only have $200,000 capital then you only have 4 months till your runway ends. Is 4 months enough time to start generating more than $50,000 a month?

Based on the above requirements, is the capital that has currently been raised sufficient? We all want to be able to do more with less, and funding can be hard to get, but when you do get funding you need to take a good hard look at the reality of the money you need and assess whether the capital you have is really enough to achieve your short term goals. We recommend getting financial advice at this point also in helping assess your situation.

On the flip side, if you were able to raise more capital would you know what to do with it? What if you were suddenly able to raise an extra $1 million, how would this change things? What would be the new runway for the company?

All of this comes down to the financial viability of the business and its ability to be sustainable. What are the options for the company over the next 2 years to ensure that it can survive?

Strategic Advice

Your expertise is in the technical development of your product. It is likely that your idea will take at least 12 months to incubate, and this will take all of your energy. So you need to consider what sort or strategic advice you will need and when you should be seeking it. 

Consider whether you should be working with in an incubator or accelerator program that can help you with the business side of getting your tech idea off the ground. They may be able to help you get your product to market quicker and ensure that you are well positioned from the business side.

When it comes to accounting there are a few options. You can seek the support of a tax advisor who can get you money back through government grants, and offer structuring and tax advice. You should get this advice early to ensure that you are structuring the business to the greatest benefit.

Having a minimum viable product or MVP can help you start to gain momentum in your business before you have finished developing and delivering your larger projects. If you have an MVP and this is starting to bring revenue into the business then you could look at a Corporate Advisor of CFO that can advise you on strategic growth initiatives around all facets of your business at a critical point in your life cycle.

Sometimes starting with the building of a financial model can be a good way to understand your business in depth and learn from a financial expert, before investing in any long term strategic relationships.   

If you want to discuss your financial and strategic viability of your tech startup then make sure you contact one of our advisors.