Investments

Tech Start-Ups Have A 100/1 Chance Of Success

Only one out of every 100 technology start-up companies will survive more than a year because their products may be clever but are ‘utterly pointless’, according to an innovation expert.

Almost every new app, gadget or electronic package that goes on sale has seen years of software coding, design and innovation, but aesthetics aside, few entrepreneurs have applied basic business principles to their brainchild.

Their shelf-life would be longer if the makers had considered what need their product fulfilled, who would what to buy the device and how big the market was for their offering.

Mat Shore, of global training and innovation firm Outside In claims ignoring these business drivers meant the shops were full of expensive and over-engineered products that no one wants.

Many of these companies look to crowdfunding or the Seed Enterprise Investment Scheme (SEIS) for investors ready to back their vision.

Doomed to failure

But many of these investors who are attracted by generous SEIS tax breaks are doomed to lose their cash in double-quick time unless they have carefully vetted the company.

“Success in business, and especially in start-ups, rarely requires a truly ingenious, complex solution,” he said.

“Rather, it is about addressing market needs better than existing providers. This can only be achieved by developing new products or improving existing ones to satisfy demand – not the other way around.

“Unfortunately, an increasing number of start-ups appear to have overlooked this cardinal rule and are bringing highly ingenious products that are utterly pointless to market.”

Formula for success

Shore says companies should look at their products in the light of need, simplicity of the solution and consider the alternatives on the market to ensure success.

Design for design’s sake or a lack of market research means the product is unlikely to become a success and quickly fall by the wayside when their marketing budgets are exhausted because they do not address need or demand, he explained.

“Start-ups that ignore this formula, or any similar version of it, place themselves on risky ground because they’ve forgotten the point of what they’re trying to achieve – to help the end user,” he said.

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