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How to create your own business startup in IT

Photo: StartupStockPhotos/Pixabay

Photo: StartupStockPhotos/Pixabay

Experts argue that the biggest problem for startups is the lack of money at the early stage. The second difficulty is finding an adequate investor or fund to scale up. The third one is to assemble a team, because there are always not enough good specialists. In addition, the startup product must be useful and there must be a request for it. And this is just the tip of the "iceberg". The Page has studied how to create a successful IT startup.

Where to find an idea and a successful product

A common reason why startups die is a lack of need for a product or service. Because, first of all, a startup must solve problems. Therefore, even at the stage of preparation, the idea needs to be tested for what solutions it offers.

A detailed study of competitors, target audiences and direct communication with them are also needed. Based on the results of this comprehensive study, a pitch-deck for a startup is being prepared. Next is the issue of investment, product development and marketing.

Daria Kushnir
Daria Kushnir
Chief Strategy & Operations Officer at Senseit.solutions

We are confident that a well-done preliminary research is one of the main success triggers for an IT startup. This area is developing the most dynamically in the world precisely due to the constant creative search for innovative ideas and their capitalization to occupy a certain niche in the market.

It is also worth analyzing the existing IT problems that need to be solved, what special exclusive service or program is needed on the market. For an idea to be successful, the following are critical: determining that such a service is not yet available on the global market, early planning stages, brainstorming, and testing the effectiveness of ideas. Search engines with different keywords should be used to find that a similar product or service exists and how effectively it solves the assigned tasks.

Why many ideas fail

According to statistics, 90% of startups are unsuccessful. The main reasons for failure are:

  • lack of demand in the market (42%),
  • lack of funding (29%),
  • unsuccessful selection of the team (23%).

In addition, many startuppers are young people who cannot always objectively assess the viability of an idea and the potential profitability of a business and have no experience of working in startups with a certain specificity.

Incorrect allocation of funds and pricing, ignorance of competitors, as well as a product without a business model (when it cannot be scaled or developed) can also lead to the project failure. Add to this a poorly designed marketing strategy, burnout of the startup founders or the team.

Often the investor may not like the research results. It is important that the investors 100% take into account the analysis of the startup project market to assess the market size, its growth, competitors, SWOT analysis, and the like.

Dmytro Sofina
Dmytro Sofina
CEO at R& DCenter Winstars Tech and IT-Association Vinnytsia

The startup problem may be that:

- the idea doesn't actually solve the real problem;

- the cost of the product is more than the price they offer customers;

- not enough customers for the product;

- conflicts in the team, when from the very beginning it is formed in an unnatural way and everyone has different interests;

- poor implementation of the product.

There are hundreds more reasons, but these are the main ones. And when the project was closed due to lack of finance—look at all the other items, perhaps the problem is in them.

What investments are needed

It is clear that without financial support it is very difficult to test an idea, develop a prototype, and bring a product to the market. But the question arises—do startup teams know how to manage funds? This includes the pricing of a product/service, prototype costs, and marketing funds.

Investments are needed in any case, but it is not easy to attract professional investors, and in the CIS this is practically unbelikely. At the very beginning, you need to develop the first version of the product for your own money or for borrowed money. And when some profit appears, then you need to look for an investor. After all, they, as a rule, invest only when there are some clients and the project needs to be scaled. It is hard to say about the numbers. If these are private investors, then the amounts will be about $50,000, if investment funds, then from $100,000 and more.

Dmitry Nor

Dmitry Nor

CEO at SkySoft Company

Some ideas today are failing without adequate "packaging" of the product and lack of media or marketing support. And startups allocate the costs for communication and audience research in different ways: some can allocate all 30%, others—10%. At the same time, teams raise funds in a variety of ways. Some receive funding from investment funds, some have their own savings, others make loans.

«The financial performance of a startup is a rather conventional concept. In our case, there is an instance when MVP (minimum viable product) was implemented for $30,000, and in another instance—for $1.5 million. MVP is only a part of the product that needs to be tested. Investments are definitely needed at every stage of the startup project development, because due to a lack of funding, the implementation timeline is shifted, and thus it is possible to lose the desired market share, and even competitors may appear.»

Daria Kushnir

Daria Kushnir

Chief Strategy & Operations Officer at Senseit.solutions

"An ideal startup when no external investment has been attracted by the time a working prototype is created. In addition, internal investments (savings) should not be channeled into monthly consumption, but exclusively into the implementation of the MVP version of the first working product. External investments are needed only when it is necessary to sell a product and, respectively, ensure its development. In such a plan, one can clearly calculate that X is needed for sales, as a result, the company will receive Y, respectively, they will reach self-sufficiency in T. If investments are attracted for investments, then this is a startup "to consumpt investments."

Dmytro Sofina

Dmytro Sofina

CEO at R& DCenter Winstars Tech and IT-Association Vinnytsia

What profits a startup can bring

Today there is a stereotype that one has only to launch a startup, and income will not be long in coming. The fact is, startups are a long-term game. Technology products require several stages of funding rounds. Often the period between series A, B and C is 12 to 24 months.

That is, it takes 1 to 3-4 years for a startup to achieve full-fledged earnings and not depend on investors. Sometimes this process can take even longer. And some startups get the desired scaling, increase the number of employees or move to new offices only after 7-10 years. At the same time, in the field of IT, margins are generally higher than in other classic businesses.

As a rule, one project out of ten (out of those that received investments) turns out to be working and profitable. There is no point in talking about those that have not received investment—there are a lot of them. In most cases, all startups are just part-time jobs of the founders or a separate product of a large company. There are only a few really successful startups with a profit, in which several people work full-time, throughout Ukraine, as well as in other countries.

If there is a profit though, then it is about 10%. You can get it in a year and a half. But in practice, this period can be very long. In general, startup revenues rarely make a profit. Basically, startups make money by selling shares to investors or funds.

Dmitry Nor

Dmitry Nor

CEO at SkySoft Company

How to structure an effective scheme of work

Startups always begin with a small team, so networking and recommendations are important. Thus it will be easier to assemble a team of people you trust.

A good team successfully combines soft and hard skills. Depending on the field of activity, there should be a chief technical officer who understands cold figures, or a sales manager who will generate cash flow, or a separate person who will communicate with users and collect feedback. The roles and powers that team members receive are also important.

For example, the startup Zirtual collapsed due to the absence of a CFO in top management. Maren Kate Donovan, the founder of the company, laid off 400 employees overnight by sending out emails to staff. Only later it turned out that the management made a number of financial mistakes and miscalculations.

For example, the startup Zirtual collapsed due to the absence of a CFO in top management. Maren Kate Donovan, the founder of the company, laid off 400 employees overnight by sending out emails to staff. Only later it turned out that the management made a number of financial mistakes and miscalculations.

Katrin Vaga

Katrin Vaga

Head of International Public Relations of government program of Estonia e-Residency

The work scheme in each company and team is developed independently. For some startups, strict vertical management is suitable (and this is normal), for some, on the contrary, it is important that employees develop horizontally and make decisions together.

In any case, there should be no chaos: someone should be responsible for important areas. The founder should be able to delegate some of their functions, and top managers should be able to properly divide the work further. Mandatory elements should be a dashboard and clear work planning. By the way, often investors even ask to show a dashboard and only after that make a decision on the allocation of funds.

Conclusions

A startup, like any other new business, is always a risk. There are many factors to consider for a project to be successful. However, not everyone is ready for this.

In particular, American analysts from CB Insights systematically survey the heads of failed startups. It turned out that the main reason for the failure was that no one needed their product or service. After all, many teams did not analyze their market. And they solved the problem that was interesting for them to deal with.

At the same time, Ukrainian developers are launching dozens of promising startups. However, real success at the international level comes only to a few.

«Just as Gitlab solved the programmers' request to store their work data and became one of the most expensive Ukrainian startups (valued at $2.7 billion), so Payoneer satisfied the need for international transfers. Today we see how Clubhouse gets users and collects investments, because it has satisfied the demand that had been growing for several years, for "live" communication. Similarly, startups such as Jobbatical (a partner in recruiting employees around the world), Topia (a platform for finding and attracting employees from all over the world), MoveMyTalent (provides a full cycle of moving services) found their clients. They saw an increase in the number of so-called "digital nomads" and covered their needs and demands while moving and settling in a new country.»


Katrin Vaga

Katrin Vaga

Head of International Public Relations of government program of Estonia e-Residency

Experts have identified successful Ukrainian startups in the IT field:

  1. Petcube.
  2. Preply.
  3. PRNEWS.io.
  4. Ajax System.
  5. Monobank.
  6. LetyShops.
  7. PatentBot.
  8. IntelSoft Technologies.
  9. Grammarly.
  10. GitLab.
  11. People.ai.
  12. Coursmos.
  13. Сlickky.
  14. Augmented Pixels.
  15. Branto.
  16. Settle.
  17. Kwambio.
  18. ИВlazr.
  19. Luciding.
  20. QROK.
  21. YouScan.
  22. Jooble.


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