How to Create a Tech Startup Company in 12 Steps
First, let’s be upfront and say that if you’re looking for a sure-fire way to create a successful tech startup – there isn’t one. There’s a lot of inherent risk in creating a startup. You may have seen the oft-quoted statistic that 9 out of 10 startups will fail – but there’s a bit more to it, so read on for tips and insights intended to skew the odds in your favor.
The impact of the COVID-19 outbreak has put a crunch on both funding and demand for startups. Startup Genome reports that funding was down by 20% globally, and by as much as 50% in some areas. At the same time, almost 40% of startups saw their revenue drop by 40% or more.
Sounds pretty dire, but the fallout from the pandemic is that the global economy may have reconfigured itself to provide even more opportunities for innovative tech startups to stand out and succeed:
- There’s a greater need for digital and online technology
- There’s a large percentage of workers looking for new opportunities
- Investors are as eager as ever to find a breakthrough startup that will provide a large return
So, how are you going to take advantage of this? Well, let’s start by understanding exactly what you’re looking to get yourself into.
What Makes a Startup Unique from a Business
While it’s true that startup companies are businesses, it should be understood that they’re a very specific type that operates in ways that may seem antithetical to how most people might assume a business should operate.
If businesses are looking to find a place within an established market, startups are interested in a novel business model that’s repeatable and scalable. However, their most important goal is to disrupt an existing market. A startup isn’t looking to make waves, they want to be a tidal shift that changes an entire industry.
A process like this takes time, as you’re not going to fundamentally change the world overnight, so unlike a traditional business that looks to make profits from day one, startups don’t expect immediate returns. Startups forgo slow, incremental growth in the hopes of explosive, exponential growth sometime in the future.
This model sustains itself by securing large amounts of funding, usually in excess of 1 million+, from investors who are looking for a large return on that investment via equity in the company. In turn, a successful startup will typically either be bought out by a larger corporation or go public with an IPO. From there the founder could think about moving on to something simpler (maybe even retire), but if they have the mindset of a serial entrepreneur, then they’re probably looking for the next challenge.
It’s the definition of high risk, high reward – and if you think you’re up for the challenge it’s important to understand that while there is no blueprint for guaranteed success, there are better and worse steps that you can take.
The 12 Steps to Create a Tech Startup Company
Again, let’s be upfront and admit that a list of 12 is rather arbitrary. We could have made it 10 or 20 – the point is less about checking off a list and more about building a mindset. Other recommendations approach this problem in a similar way, though the specifics may differ. In “The Lean Startup” by Eric Ries, for example, the recommended path is through three steps:
- Vision – to define your startup and experiment with it
- Steer – to test your product/service and pivot as needed
- Accelerate – to grow and scale
The point isn’t HOW you build your mindset, but THAT you build it – though preferably in a way that allows for the greatest odds of success. So, for your consideration, here are our recommended steps to forge your path.
1. Build Your Knowledge Base
Whether you’re a tech neophyte fresh out of higher education or an industry veteran looking for the next big thing, the same rule applies that you need to be open to learning. This is the bedrock upon which every subsequent step rests. If you think you know it all or go in expecting to just figure it out as you go along, then you’re predestined to fail.
Entrepreneur and coach Leo Widrich advocates for a “not knowing is more intimate” approach – if you understand that there’s so much you don’t know, then you’ll never stop learning and will be able to effectively build on your knowledge base. The best way to support that base is to draw upon your experience and the experience of others. Find a mentor that will point you in the right direction and keep you honest. Build up experience working in other companies or in a directed degree program – such as a technology and entrepreneurship degree awarded jointly by the schools of Business and Engineering.
Creating a company is an iterative process – you learn from other businesses, you learn from yourself, and you learn from your customers.
2. Build Your Network
If your startup is going to be your baby, then it’s important to remember that it takes a village to raise a child. You can wear a lot of hats as a founder, but you can’t wear them all at all times. Who’s going to build your product and code your system? How are you going to market and promote your product? Who can put you in touch with investors?
The more you connect with others the more likely you are to find the founders, investors, lawyers, and designers that are going to be the people that you want to partner with. Whether you’re in a company, on campus, or connecting online, never stop making new connections and establishing contacts. You would be well-served by attending a program that includes a faculty with a wealth of experiences, from startup entrepreneurs and high-achieving tech CEOs, to patent-holding Ph.D. engineers and sought-after industry advisors.
3. Partner with the Right People
You’ve built a network, now you need to use it effectively. First, decide if you’re going to really do this alone or if it will be better to find a co-founder who will help get things off the ground. You may be giving up some autonomy, but you’ll be gaining support and, perhaps most important, a new perspective.
From there it’s time to build a team of complementary skills. Christian Reber, founder of Wunderlist, from his experience recommends 4 specific individuals:
- a product person
- an engineer
- a marketing/sales person
- a business/finance person
4. Understand Trends and Markets
Now, what exactly are you looking to get into? If you’re like many startup entrepreneurs, you are already sitting on a big idea. Either way, this is your research step and it brings to mind the adage of “measure twice, cut once.” The more you understand what the different industries are and where they’re trending, the more you can see how you might disrupt them. Questions to ask include:
- Which are the markets for tech solutions?
- What are the specific needs of those markets?
- What are the common pain points in these markets?
- What’s the competition look like in those markets?
- What sort of product would meet those needs?
- Is there an oversaturation of solutions?
- Who, specifically, are you serving?
It’s tempting to reach the widest possible audience, but if you try to design something that’s for everyone, then you’re not really designing for anyone. If you’re looking for inspiration for an audience, take a lesson from Tony Fadell, the designer of the iPod, and look into a mirror. He wasn’t looking for ways to redesign how music was stored and played because he wanted to get rich; he tinkered with design and was brought into Apple because he loved playing and listening to music and hated the existing technology.
If you didn’t start this process with your idea already formed, then this is your opportunity to develop it.
5. Define Yourself
Bring that level of self-reflection to the forefront of your startup company. If you’re going to promote yourself and your product you need to be very clear about what you are bringing to the table. Once you consider yourself as your own client, then you have a mission to work backwards from the results that you want to achieve.
And once you have that big picture established, then it’s important to have that essence distilled down into your culture, your passion, and your mission. Every component of your company, from the name, logo, and domain should be a reflection of that identity. More than helping you stand out from others, it keeps you on task and true to what you’re looking to achieve.
6. Prepare for Setbacks
Remember when we talked about failure and setbacks at the start? Well, it’s going to happen to you, things WILL go wrong. So, it’s important to have contingency plans in place to account for different kinds of setbacks. Ask yourself worst-case scenarios and see if you have workarounds or where you can go for other options.
- If your funding dries up, do you have secondary resources you can turn to?
- If someone beats you to market, how can you plan to be better?
- If the tech isn’t working, what can you pull from it to pivot in another direction?
7. Define and Validate your MVP
Already have your idea? Now make it work – get your basic features up and running to develop your minimum viable product (or MVP). Just don’t expect this to be a smooth process. If understanding your markets and customer pain points were the bigger picture, now you’re going to have to take the time to drill down into specific details.
- What are the specific problems your MVP is solving?
- Is it REALLY serving a need or is it just something that you find interesting?
This is a crucial turning point, as not being able to find a market is the #1 reason that most startups fail – noted in 42% of reported cases. You have to do more than demonstrate how you’ve solved the problem; you have to get others to understand why it’s a problem and why they want it solved in the first place.
8. Raise Capital
So, you’ve created a pitch for your design or have gone a step further and crafted a promising MVP. Now it’s time to pitch to investors. Whether you’re looking for support from venture capitalists or angel investors (or really either, you probably can’t afford to be picky) you should develop your short pitch and understand what specifically they’re looking for. If you can show them that they’re likely to get a return on their investment, then they’re more likely to invest in you.
That, of course, is just the start. Most startups take years before they’re actually successful, which means that you’re going to need that funding to last. Venture capitalist Fred Wilson recommends utilizing a cash forecasting model to ensure that you can operate and shift priorities if there are changes in revenue. At the very least, you can predict when you might need to procure additional funding.
9. Prepare to Manage
It’s your startup, so that also makes it your responsibility. Maybe at the start you were fine with handling everything yourself, but as your team grows you’ll need to make sure that everything is on track and everyone is communicating. If your engineer can’t get the functionality to work as intended, then your product designer better know the bad news as soon as possible.
Either prepare to oversee everything yourself or hire someone who will share that responsibility. While part of the “fun” of a startup is the sense of freedom and exploration, everyone’s going to be much happier (including your investors) if you’ve established a workflow and a means of accountability.
10. Get the Word Out
You could have the best product ever, but if no one knows about it then it’s not going to do you any good. You (or someone on your team) is going to have to find ways to hustle, working overtime to promote your company and your product at every opportunity.
You don’t necessarily have to work harder; if you’re able to find new ways to market your product, then you could break through the noise. Because make no mistake, there is a LOT of noise in the tech industry, and getting your voice heard is going to be no simple feat.
11. Plan to Scale
Things are going well, you’ve found some initial success and people are paying attention to you, so what does the future hold? If you’re going to achieve real success as a tech startup, then you need to plan for how your business is going to scale.
Do you have the servers to handle a massive influx of online traffic? Is production able to meet a possible ramp up of demand? Are you at risk if your supply chain has a problem? Does your team have the bandwidth to work with new clients and push out updates on time, or are you going to have to hire new people?
Also, don’t be caught off guard if a partner leaves to start another company or a star developer gets hired by a rival. Can you replace key staff members when they depart or does it leave the entire company dead in the water?
12. Seize the Opportunity
This is similar to the idea of staying flexible, but on a much larger scale. Because there’s one factor that you can never plan for – chance. You can call it timing or luck if you prefer, but chance plays a part in every decision you make. Look no further than the COVID outbreak to see how unpredictable events can make or break opportunities. Prior to the pandemic, telehealth services made up just 1 percent of visits to primary care providers in the U.K., but once the lockdown started services grew from 70–100% in weeks.
Be prepared to leap ahead or even take a step back if different opportunities present themselves. Perhaps you just happened to earn the interest of an investor before you’ve even started work on an MVP. Maybe a rock-star developer just became available for hire even though you felt your team was finalized. What if a week before your launch a new pandemic appears with the same name as your product?
What you choose to do, or not do, in a one-in-a-million scenario could be the most important decision you make for your startup.
Common Mistakes Your Startup Should Avoid
Sometimes along your journey you lose sight of the advice that got you to that point. Or maybe things are going so well that you feel you can skip a few steps or take a little extra risk. Whether you’re just about to start your research or about to make that first pitch, keep the following in mind:
- Don’t prepare to scale too early – Early days are challenging, so focus on doing the work of making your product viable first and save the detailed questions of scale for production, advertisement, and growth for later.
- Always do your homework – Sure you know your industry inside and out, but how about the investor you’re about to pitch to? You’re confident that no one else has anything like your product, but do you know if that’s because of any legal restrictions?
- Don’t go it alone – You don’t know everything, so look to partner with experts in their field to relieve the burdens of starting up. Need help in getting feedback on your product? Make use of early adopters / initial users to help create and refine. Not only will this provide helpful assistance and new perspectives, the more you are able to share the burden, the more you mitigate the risk of burnout.
- Don’t ignore things because they’re hard – Sure, you have a great concept for a social app, but how do you get people to sign up for it? You have the vision for a breakthrough medical device that uses artificial intelligence, but who’s going to do the actual programming and how are you training your AI?
Helpful Tech Startup Resources
Interested in learning more? Start with looking into any of these resources
- Information on and connections to investors:
- Updates on Tech news and trends:
- Domains and web hosting:
- Co-working space resources:
- Logo designs:
- Degree Programs in Innovation, Technology and Entrepreneurship
Explore USD MITE
You might say we are deeply invested in the world of startups here at the University of San Diego. In fact, our online Master of Science in Innovation, Technology and Entrepreneurship degree program represents an innovative, leading-edge approach to equipping startup entrepreneurs with the skills and resources that will aid them every step of the way.
At MITE we’re focused on how connectivity is driving the future of technology and how businesses grow and prosper. Our faculty draws upon their experience from industry to help save you time in developing the skills you need to thrive in business and technology. Their cross-functional leadership training will help you recognize opportunities and lead innovation in your field
USD is an established leader in sustainability and social justice – give you the perspective to think about these things for the FULL Lifecycle of a product from conception to market. Our connections to our community enable us to host a campus wide set of awards where students can present their pitches and win cash awards from local organizations and angel investors.
This unique degree program is developed by both the University of San Diego’s School of Business and its Shiley-Marcos School of Engineering – visit our main site to learn more about this new approach to a degree for aspiring entrepreneurs.
FAQs About Starting a Tech Startup Company
Why do startups fail?
Take your pick – they didn’t have a market for their product, a team member bailed out, the tech just wasn’t actually feasible, the funding ran out. There are dozens of reasons why your startup might fail – and it might not even be right away – the majority of startups actually fail after their first year.
What are investors looking for in a tech startup?
Bottom line – they’re looking to make a profit. Most expect to lose some money on investments, but they didn’t become investors by making lots of bad bets. You need more than a product that looks like it has a market, you need to demonstrate that you have a plan, a team that will execute it, and the confidence and drive to get it done.
Can I start up without investors?
It’s possible, after all Microsoft never raised venture capital. If you have your own means of support it’s possible to bootstrap your startup, but that’s much more likely to just be a “first step” toward attracting additional funding.
How long will it take for a startup to be successful?
It’s going to be a while. It used to be that startups could achieve success in 5 or 6 years. Today the average time between the launch of a startup and when it’s deemed a success is 9 or 10 years.
What’s the best time to start a business?
Some say that you can start a business at any time; others state that there are windows of opportunity that you should look to take advantage of. There are more opportune times to start a business – for example, it may seem shortsighted to start a business during a recession or a global pandemic, but if it’s serving an important need in that time, it may be the PERFECT time to start that business.
Check out this list of successful businesses that started during difficult economic times:
While it’s generally better to be early than late, being successful is not about first-mover advantage or being first to market – it’s about taking full advantage of the opportunities presented to you.