Like all good stories however, a lot of the harsher truths on the subject of starting up a successful tech company are somewhat glossed over in the process and it is important that you are aware of exactly how much of a struggle it can be.
Scalability and the cost of traffic
About ten years ago, if you had said technology company you would have probably meant Microsoft, possibly Apple. Nowadays you are more likely to mean web-based company. They spring up all the time in varying degrees of profitability but the financial realities of running a web-based company are often misunderstood.
The internet might sometimes feel like a gold mine and it's very easy to fall into the trap of thinking you can generate money through it with absolutely no over-heads. If you feel this is the case, have a read of this excellent post on the SEO Moz blog about one webmaster's traffic bill following the influx of traffic he received from a successful April Fools article.
(http://www.seomoz.org/blog/lessons-from-a-million-pageview-day)
To put some more figures behind this, even back in 2010 Facebook was spending $50m a year on data centres. (http://www.datacenterknowledge.com/archives/2010/09/16/facebook-50-million-a-year-on-data-centers/ ) A year later they spent more than $600m and a further $500m the year after that on the road to their IPO. http://www.datacenterknowledge.com/archives/2012/05/18/why-facebooks-ipo-is-good-for-the-data-center-industry/
Today, according the social network itself, it costs more than $1bn to run every year. (https://www.facebook.com/about/ads/) Obviously its costs didn't start as large as that, but if you start trying to punch above your weight and take on the tech titans of the world, you should be aware that it comes with significant costs.
A tech start-up will hopefully have more infrastructure to worry about beyond a simple website, but even that base-line of an online presence has hidden complications that many won't consider or will simply forget about periodically. Although it can cost a very small amount to get a website up and running, that cost will escalate further on down the line as you build traffic and require a more powerful server. If you add more processor intensive functionality to your site and you don't invest more into your web tech, users will find your site slows to a crawl or simply drops offline on a frequent basis, which can become a significant problem if you are offering any form of service that you want your customers to adopt or if you offer any kind of e-commerce functionality.
Start small
The main way you can remain grounded with your tech start-up is quite simply to start small. Having a closed beta of your product and inviting members of your core market can have the dual benefit of both drumming up buzz and excitement for your company's tech and also testing out your features without the risk of becoming a colossal flop if something falls over during a stress test.
This beta can then slowly expand outwards over time to encompass more and more people and it is an approach that many of the successful tech giants have adopted before. Facebook only rolled out its service to university at first, to initially get on to Spotify you had to be invited by a friend and Google has a reputation for keeping the 'beta' tag on its products long after it has been adopted by the mainstream.
Even giants might not have giant revenues
The real elephant in the room is that although undeniably successful, even the biggest tech start-ups are not always sustainable. Whereas Google has remained dominant and looks to be in a strong position thanks to its frequent and aggressive adaptation and thought leadership, social media companies along the lines of Facebook or Twitter are in a much shakier position with a reliance on a user base that is apparently easily startled by advertising. Lessons can be learnt from Facebook's flotation on the stock market, as investors have been reluctant to pour money into it due to scepticism over whether it really has much potential to earn mega-money.
You should also be wary of bubbles in the tech world. Facebook supplanted the at-the-time unshakable MySpace and analysts are already predicting that Facebook will run dry once the current generation of teenagers decide en masse that they don't want to be on the same omnipresent all knowing broadcast platform as their parents. They are already starting to head towards Instagram and other similar emerging platforms, and this sort of fickle user-base behaviour is likely to increase as more similar platforms spring up. (http://news.cnet.com/8301-1023_3-57572154-93/why-teens-are-tiring-of-facebook/)
Stay grounded
The key to surviving and ultimately thriving as a tech start-up is, like any other business, planning. Your idea might be the most ridiculously intelligent and fiendishly clever creation that earns you huge amounts of kudos and respect among the tech community, but if you've failed to adequately plan and aren't too sure how it will make money, then ultimately it's worth nothing to you.
Also, if you've decided on a form of revenue generation make sure you understand it and don't just assume it's a simple market. To use advertising revenue as an example, if you pin your hope on this then make sure you know enough about how ad networks work, that you have a basic knowledge of real-time-bidding and understand the possible benefits of a media sales team. Just because you know what CPM means, this does not mean you know everything you need to know for this stream of business.
The tech start-up fairy tale is an alluring one, but you can't plan to make the next Facebook or Google. The next Facebook of Google will be things that our present minds probably can't comprehend and will rely on new emerging technology. Stay grounded and keep your business within its limits and you are more likely to succeed than to crash and burn out too quickly.
Author Bio:
Written by David Hing for YOUR Insurance, (http://www.yourinsurance.co.uk/) a specialist broker serving the SME community.
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