Tech Startup Challenges (and How to Overcome Them)

Challenges your tech startup will face

Many tech startups are familiar with these common challenges, so it’s essential to be prepared to navigate them before starting a business.

1. Tech startups face constant change.

Rapid changes in technology — more than in any other industry — can throw a startup off-kilter. As many tech entrepreneurs know, there’s massive pressure to move quickly and beat the competition to a solution. 

“If a company isn’t nimble enough or cannot execute fast enough on an idea, the window of opportunity for your product or service may very well close before it is ready for the market,” cautioned Andrew Van Noy, CEO of DeepPower, Inc. “If you feel you have a solution to a problem not addressed yet on the market, don’t be fooled — it won’t be long before someone else does too.”

However, being first doesn’t always mean you’ve won. If a product or service doesn’t yet exist, there’s a steep price to pay to blaze new trails. Often, the second mover can capitalize where the first can’t. 

Solution: Get ample feedback from trusted advisors before launching your idea. 

Van Noy says tech startups should seek feedback on their ideas, goals and path to success. They may be dazzled by their great business idea and need some realistic advice about whether the changing nature of their industry might make their venture difficult to execute. 

“You may have a great business idea, but come back out of the clouds,” Van Noy advised. “Get feedback from friends and relatives on your idea and take their criticism seriously. Be realistic about how much time, money and energy it will take to make your idea come to fruition. Talk to other founders and leaders and see how long, hard and expensive it was for them. There is nothing worse than seeing entrepreneurs get their dreams and savings destroyed because they thought it would be easy.”

2. Tech startups are often unable to reach their initial goal.

Because technology changes so quickly, there’s a distinct possibility that you may not be able to complete what you initially set out to do with your startup. Instead of accepting the failure of the business or shifting their business strategy, many startup founders let their operations stagnate.

“So many startups end up in ‘zombie’ states,” noted Shawn Livermore, CEO at Product Perfect. “The founders don’t want to give up and are embarrassed to concede defeat. So, they keep the dream alive but never really complete what they originally set out to do. Large companies are not worried if one of their projects never gets completed. But in a startup, not completing something means you leave the door open in your life and that’s worse than failing.”

Solution: See your idea all the way through — even if you have to start over.

Finishing what you start is a good rule of thumb for many situations in life, but especially for a tech startup. You may even need to accept failure and learn from it. 

“If you fail, try again, but next time, do it faster,” Livermore advised. He explained how getting his previous company off the ground took several tries. “Ziptask started, failed, pivoted, started again, failed, pivoted, started again, took investment, succeeded and now is growing. It took three solid efforts by an extremely determined group to get to legitimate revenue.”

While tech startups may face steeper competition and more unique challenges than startups in other industries, your level of dedication to your new business will ultimately determine your chances of success.

“The odds of any individual building a market-leading company from scratch [are] minute,” explained Jeremy Colless, managing partner and CEO at Artesian. “Being delusional will not get you there. Skill, persistence and a bit of time and luck are needed.”

3. Tech startups face partnership challenges.

Partnering with another company in a related field may seem like a great way for a new business to grow. However, the stakes are much higher for tech startups, whose operations can be ruined easily by following a fad.

“The technologies that are mainstream today may be eliminated over the next few years,” explained Chris Miles, CEO of business software provider Miles IT. “I have seen many companies develop entire product lines and build services and solutions based completely on emerging or popular technologies. When those [fads] go away, everything dissolves. Then what? You have to make sound and smart decisions.”

Solution: Spell out collaboration rules before committing.

When choosing which companies to do business with, clear policies can help you make the best decisions for your startup. Miles’s company, for example, chooses to work only with larger, established companies that have a good chance of longevity and success. Conversely, some entrepreneurs find that large companies can steal and replicate their ideas at a lower cost.

“When you are building a business, it is important to focus on instituting policies that help you mitigate risks,” Miles cautioned. “As an entrepreneur, you always take risks. But with policies in place to guide decisions, you are not throwing the dice and hoping for the best.”

4. Tech startups face hiring challenges.

Hiring and recruitment can be nerve-wracking for any startup, but tech startups often employ too many people before they’re ready. Even if you have investor money behind you, stretching your resources too thin immediately can become a problem quickly.

“Tech startups are fast-growing and attract massive amounts of funding, but it’s hard to accommodate that growth well,” explained William Zhou, senior director of product management at PowerSchool. “Tech startups are notorious for overscaling or hiring too many employees prematurely … Always hire slow and fire fast.” 

Additionally, a new tech business may not have the financial resources and perks to hire the best employees.

“Cash flow is one of the biggest problems facing any startup,” noted Mat Peterson, founder of app development company Shiny Things. “Larger tech companies in Silicon Valley can pay much higher salaries than a local startup can afford.”

Solution: Attract top talent with opportunities for creative control.

If you want great employees to join your team, give them the power to lead. One of the biggest advantages of joining a startup is the ability to flex your decision-making muscles and help build something from the ground up. 

“Allowing your team to have freedom and creativity with their projects gives them a lot of satisfaction and makes them less likely to go [to a larger company],” Peterson shared.

5. Tech startups face cybersecurity risks.

While nearly all businesses rely on the internet to some extent and may fall victim to a data breach, tech startups often operate entirely online or have a massive online presence, leaving them uniquely vulnerable to cybersecurity incidents. In most cases, tech startups serve the business-to-business market, which means other companies depend on theirs to keep things running smoothly.

“Because tech businesses provide a product or service to help other business owners perform their operations, they are open to liabilities of omission, errors and other exposures,” cautioned Eunice Lim, managing director at commercial accounts for insurance company Travelers. “To overcome any possible losses, you need to make sure you understand those exposures first.”

Solution: Make cybersecurity a priority for your whole team. 

A comprehensive firewall and antivirus software will mitigate many cyber risks, but these will only get you so far. Lim recommends emphasizing small business cybersecurity measures. For example, train employees in the proper protocol for handling sensitive customer and credit card information and ensure company data is accessed only through a secure, private internet connection. 

6. Tech startups face burnout challenges. 

Entrepreneur burnout is one of the biggest problems that can kill a small business. When you have created a business from scratch, letting go and allowing others to help you is hard. However, going it alone can be a disaster that leads to burnout. At a certain point in your company’s growth, you must identify and hire a management team with the knowledge and skills your tech startup needs to grow. For example, you’ll need someone to manage your startup’s financial health and guide its marketing strategies.

While you may be the technical genius behind your product, it is a rare founder who is good at engineering, management, operations, finance, sales and marketing. Even if you have outstanding skills in many areas, determine which functions are essential to the company’s success and spend your time on those while handing off less critical tasks to your team. 

Solution: Don’t be afraid to collaborate and delegate. 

Be open to growing your team to add the expertise your tech startup needs to succeed. If you work with venture capitalists and other investors, they may insist on bringing in an executive team with experience in larger companies. Although it may be uncomfortable, find a way to work with other professionals and learn delegation skills. You’ll be able to grow your business while helping shape your team’s values and workplace culture. 

7. Tech startups face marketing and market research challenges.

The philosophy of “build it and they will come” works only in fiction. A best-in-class product that solves a problem does not guarantee a business’s success. In today’s competitive tech landscape, success hinges on a combination of a good product, effective small business marketing and quick market saturation to discourage copycats and establish a critical-mass customer base. 

Tech startups can increase their chance of success by investing early in market research and analysis in the product development phase and beyond. 

Solution: Research your target market. 

It’s crucial to research your target customer thoroughly. Learn their marketing demographics, what’s important to them, how they perceive your product and what they think of your competitors. This information will help you shape your marketing strategies and price your product appropriately. 

During product development, use the prelaunch beta testing period to improve the user experience, reduce customer frustration and eliminate bugs. Market research can also give you insight into what other kinds of products and enhancements you can create that will meet your customers’ needs in the future. 

According to Hinge Research Institute’s High Growth Study, more than 40 percent of tech firm leaders said that they anticipate the biggest challenge over the next three to five years to be unpredictability in the marketplace. To meet this challenge, your firm should engage in continual market research. That way, you won’t be blindsided by a competitive product or a shift in the market.

Tech startup success means preparing for risks 

Making your tech startup dreams come true doesn’t happen overnight. It’s essential to be realistic about potential obstacles and stay cautiously optimistic as you plan your venture. The good news is that success is possible with enough planning and thorough preparation. Be aware of any potential challenges and stay ready to pivot when the unexpected happens. When you encounter roadblocks on your business journey, you’ll be ready to face them head-on.

Natalie Hamingson and Jennifer Dublino contributed to this article. Source interviews were conducted for a previous version of this article.