You finally came up with a cool IT solution and started working on its design?
3 fatal mistakes of IT startup
AppLaw Tip: Learn the failure stories of other startups and don't repeat their mistakes.

We analyzed 3 wrong decisions that can delay the realization of your dream or prevent it from coming true at all.

*Reading time: ~ 5 minutes
Postponing the launch
You can make endless changes to the product, sharpen your business communication skills, and rewrite the business plan.
However, this does not bring you closer to the launch, which means that with every missed day you are moving away from the date when your idea will finally bring you money.

It is better to prepare an MVP, launch in such a demo mode and get to work. This will help you start building a reputation and visibility, and get early product reviews and ideas for fixes. Already having at least a partially working product, you will be able to apply to investors for financing.
At the same time, if you delay entering the market indefinitely, you may end up with bad news.
If your startup is in the field of cryptocurrencies, NFTs, or other areas that are not fully regulated, there are risks that at some point the state will introduce certain restrictions for it.

At best, you will have to obtain additional licenses, complete checks, and wait longer, even when you have a product ready to launch.

In the worst-case scenario, the authorities may completely ban the work of businesses in such an area or limit it so much that it will not be profitable. And then you will have to look for a new country to open your startup, and start everything, if not from scratch, then at least from the middle.
Conclusion: launch as soon as possible with a ready minimum viable product to start attracting investments, building awareness, and testing the product.

Even if you have to move to another country, it will be easier to adjust a ready-made solution to the requirements of a new jurisdiction, present it to new partners and investors, and promote it to the target audience, taking into account previous launch experience.
Ignoring market study
Another risk of delayed market entry is related to competition. Every day, especially in fast-growing industries, dozens and hundreds of startups are launched. And the chances that your concept will be unique are reduced.
If you confer with acquaintances and colleagues in this field about this or that detail of your idea, sooner or later it may fall into the hands of a more ambitious businessperson who will have time to implement it even before you launch.

Some investors who were willing to give money to you will provide it for a more prepared and previously presented competitor's idea. In turn, for ordinary users, his startup will become associated with the solution and start forming a reputation. And if you keep waiting, when you finally launch, you may be perceived as a follower.
But if you are ready for competition, believe in your product, and prepared to actively develop it, such a delay may not be so fatal for you.
Another feature of the competition is that large companies can come up with the same or similar solution to yours. But they have everything that you might not have: money, reputation, recognition among the target audience, and technical and human resources.

They will be able to quickly pass the testing stage, get extensive feedback from loyal users, tweak the necessary features and invest in advertising and promotion. In this case, you will not be able to compete with them on equal terms and risk losing customers and popularity in the early stages.
On the one hand, a lot of competition means that there is a demand for your product and people are ready to buy it. But at the same time, it is worth assessing your ability to compete on price, promotion, and advertising costs with companies that already have sales experience.
But what if you have developed a product, and it has not met with much interest from either startups or big players? Does this mean that the niche is free, and it is worth actively investing in it?

We encourage you to think and answer the following questions:
  • Does your product solve a real problem for a specific group of people?
  • Is there a need for it among the target audience?
  • Was there any previous experience of launching similar solutions and what were its successes?

If the answers are mostly negative, it is better to immediately look for a niche in which the competition will be moderate.
Conclusion: choose an area for your product with a launching showcase experience. Other companies should have spent money on promotion and created a certain understanding among people about the need for the product, and the target audience has confirmed their need and is already paying for it. Too many or no competitors should discourage you from entering such a market.
Trusting your partners too much
For all participants in a startup, it is better to write down all the moments of the agreement on the validity and obligations of a single contract.
Often, startups form a team of several people, where each is responsible for different issues:
  • technical implementation of the concept
  • negotiations with investors and fundraising
  • recruitment and employee management
  • general management and representation of the company in public
  • promotion and marketing
These are the key questions that often become crucial: what is everyone's stake in the business, what income each partner receives, and how the opinion of partners is taken into account when making important decisions.
If these provisions are not legally fixed, each of the partners has the risk of being unexpectedly left behind and losing all rights to joint results.

What can be expected from former good friends in this case?

  1. Make sure that responsibilities are evenly distributed across the team. In the event of a conflict, one of the partners may leave, taking the entire business with them. He can argue his right by the fact that it was he who was responsible for the most voluminous stage of work (as a rule, technical), and all the rest supposedly just moved the pieces of paper around.
  2. Control partners' access to source codes and files, concept materials, financial documentation, and reporting. When there are only a few days left before a startup enters the market, someone from the team can take all the documents for themselves, register a business, trademark, and copyright for themselves and their new company, and leave the rest of the partners with nothing.
  3. Especially check those who are responsible for financial negotiations and accounting. In words, they can negotiate with investors on the same conditions. However, in reality, it may turn out that they have kept some of the money for themselves, or that they have already signed an agreement that is unfavorable for the company, but beneficial for themselves personally, on behalf of the startup.
Conclusion: Agree on the division of roles and responsibilities, the distribution of income depending on the contribution of each partner, and responsibility for attempts to exit or play on the side. This is how you secure all partners and the startup as a whole: such a document will be able to protect your interests in a dispute with a conflicting partner.
The AppLaw team offers you support at every stage of creating your IT startup and is ready to accompany you after its launch.
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