5 start-up costs myths debunked
Despite the fact that there is a new, ambitious tech start-up launched pretty much every day, there has never been a better time to try to get one off the ground. Of course, it’s easy to look to the famous start-up successes from the US as an example of how to go about things, but the reality doesn’t have to be all about spending money.
01. We’ll need an office in the city
Any office in any city is a cost that a start-up might not really need to take on. Offices can certainly be a good idea if you’re working in a large team, or you regularly need to have clients meet everyone involved. But the reality of modern business is that Skype or Google Hangouts offer amazing ways for multiple people to connect over great distances. If you do need an office, first see if it’s practical to locate it somewhere outside of the city. Costs will be far lower and you’ll have the creative benefits of sharing a space with your colleagues, but with lower rent.
02. We’ll need a big pot of seed money from Venture Capital (VC)
There are few people who would, if offered, turn down a large investment. It certainly does help to take the personal risk out of a tech firm. The big problem with getting funding though is that it takes time and will ultimately remove some of your profit if you ever sell
Getting funding will be right for some – especially those with high costs – but if you can manage to avoid it, you’ll retain ownership of your business and have no pressure to exit and produce a return on that investment. It sounds obvious, but investors want one thing: a return. Their patience will be somewhat tempered by that.
03. We need to have an exit plan
Some start-ups are intended to get funding and then get sold to the highest bidder as quickly as possible. For some businesses this works well. If your idea is really good and you can put it together quickly then you might find Google will come knocking with its cheque book. But the chances of this are small.
So it would be far better to follow the example set by start-ups such as Imgur, the US-based image-hosting site, which was profitable from the start. These “bootstrapped” start-ups can make money for any investors and build a desirable and profitable business.
04. Making money relies on secrecy
You might assume that, if you’re going to launch a tech company, the only way for it to be a financial success is if it’s a secret right up to its launch. This has, with some exceptions, been largely disproven. In a crowded market, it’s incredibly valuable to have people aware of your product and talking about it. Any hype will help to get you noticed by the media.
05. We need to be constantly in the media to be a success
You could waste a lot of money trying to attract the attention of the wrong media. Focus instead on using social media to get in touch with your potential target audience. If you can get other people talking about your idea, which is obviously cheaper than spending a fortune on advertising a brand-new business, then the bigger boys will notice eventually. A well-timed tip to a site or publication with a large audience might net you more value than any other more expensive approach.