Over the past decade, starting up a tech business has gotten much cheaper. Servers and other hardware are now available on a SaaS basis, allowing you to pay as you go for what you need. Thanks to the increased availability of APIs and SDKs, you don’t have to code everything from scratch, allowing you to speed up your development cycles. New tools and communities are making it easier to launch businesses collaboratively.
The cost of bringing a product to market has dropped 90%, and the speed to do so has increased the same amount. As a result, there are more startups than ever—and they’re launching products at an increasingly fast pace.
This dramatic change in the startup landscape has profound implication for entrepreneurs trying to enter the market. Here are three key things you need to know to thrive in this new world.
Faster, cheaper innovation affects startup funding
It used to be that an entrepreneur with a solid business plan and a great idea for a new product could secure seed money from investors to build a MVP (minimum viable product). Those days are now over. Because development is so much cheaper and easier, there are thousands of companies with solid MVPs chasing investment dollars. If you’re an early-stage startup, you will need to get creative to get through your pre-revenue growing pains.
This doesn’t mean there’s no seed money available. On the contrary, there’s much more than a few years ago. If you are a startup with a viable product, customer interest, and a large potential market, investors will be eager to invest in you—if they can find you in all the noise.
In fact, you may want to consider raising a larger seed round than you had intended. That’s because there are four times more startups that receive seed investments, but the available amount in a Series A round has remained the same. A larger seed round will give you more time to reach critical milestones that put you in a stronger position to compete for a Series A round.
Figure out your product-market fit early
With so much competition for both customers and investment dollars, you need to find your product-market fit as early as you can. Even if you’re breaking into a market with little competition, you’ll have a hard time wooing investors if you’re still grappling to figure out your product-market fit.
So get your MVP out there as quickly as you can, before you’ve burned through too much capital. Keep testing what you’ve got and refine your product based on customer feedback. Your company is nothing without a loyal customer base.
Keep a sharp eye on key metrics because you will have to use them to prove traction to investors. How is the number of users changing over time? What percentage of your customers are repeat users or subscribers? Are you seeing an uptick in referrals?
Competition for talent is fierce
Hiring at startups is hard. Since you simply won’t be able to compete on stability, benefit packages, and regular hours, you’ll need to be able to sell the potential of your company. And just like in fundraising, you’ll have to convince your candidate to believe in you and the founding team.
The good news is “working at a startup” is a trendy career choice. If you are in a concentrated market like the Bay Area, you will be constantly challenged to keep your employees from jumping ship to other startups.
Beyond the foosball table, a game room with beanbags, and free beers, what are some practical things you can do to attract talent?
1. Create buzz
Think about turning your startup into a talent magnet. Much like marketing your product to potential customers, or marketing your startup to investors, you need to market your company to potential employees. Build a strategy: what makes your company a great place to work? Be active in local startup events; be vocal about how you are always hiring talent; and be able to articulate the vision and market potential of your company.
2. Deliver an easy and fast hiring process
We’ve all had the experience of applying for a job at a big corporation. It is not fun because it’s full of paperwork, screening calls, scheduling nightmares, and lengthy negotiations. You can do much better at a startup. Leverage employee referrals and use online recruiting platforms like AngelList, Hired.com, and your company LinkedIn page to find candidates. Once you find someone you like, deliver a smooth and fast experience and minimize the back-and-forth.