Three Key Questions You Need to Ask Before You Start a Successful Tech Co.
There are probably hundreds of books and articles that address various factors and approaches to when it comes to starting a tech company. And, I wish there was a simple formula. That said, I’ve learned a lot from my experience and observation about what fundamentally needs to be in place, whatever the landscape. While these fundamentals are similar to what I hear from my venture capital friends, here’s my perspective as an operator/builder.
The first might question might seem obvious, but it’s one that most entrepreneurs don’t take as seriously as they should. Is the size of the market you want to serve large enough to make you successful? I’m not talking about a general market size measure that could reach into the billions. Rather, what’s the addressable market? It involves identifying who, how many, and what the cost of reaching them? And, don’t diminish the “who” – being clear on your “buyer(s)” enables you to assess the size and whether or not you can reach them easily or not. Most companies don’t get traction simply because they aren’t clear on who their buyers are, who will use the product and what others will need to be involved in the buying process.
The second fundamental question revolves around your product and the needs it addresses. I like to give two simple tests. The first requires you to imagine (and hopefully test in real life) yourself knocking on the door of your ideal prospect. Try to envision all the demands and distractions on that person. When they answer, you ask “you know that problem <describe what your product solves>…” The only truly acceptable answer is “My gosh, yes! If only I could solve that because I spend a lot of time/money/effort on it!” Without that reaction, you’ll have a major hill to climb.
The second test is related but more specific to how differentiated your product is to alternatives, most especially the alternative of doing nothing. I suggest a classic positioning statement exercise where you fill in the blanks to “For <end use>, <my product> is a <label of what it does> that <primary benefit>. Unlike <alternative>, it <main differentiator>. There are numerous books and articles that can give you more background on this exercise. I recommend these two simple items as they force you to focus on what’s at the core. The third and final fundamental question to ask. Are the people you choose to join you on your journey too? Do they have a deep understanding of the problem? Do you have experience in working with them? Have they had multiple successes or, if not, are they at least humble enough to know that having a single success doesn’t guarantee another one?
Let me give you a personal example. My current company, Respond Software, is my fifth start-up and the second that I co-founded. It is a cybersecurity company addressing a market that is in the billions of dollars – and we confirmed that the budgets were there with early design partners (who we hope/expect will be our initial customers). So far, our product is passing the door-to-door salesman tests for both the problem and our unique approach to it (we emulate a real, live security expert’s decision-making for problems that are difficult for people to handle). Finally, the team is extremely experienced in cybersecurity, modern software development, and go-to-market activities.
That’s how I gut-checked Respond’s fundamentals. We definitely believe we are addressing a large and quite painful problem for the addressable market in a novel way.
As previously stated, there are a lot of other factors that come into play, not the least of which is how you define “success”. However, being able to answer these fundamental questions is key to the endeavor of building a successful tech company. At least, that’s worked best for me.