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Overcoming Challenges Facing Early Stage Software Companies

Attending the Dublin’s Dockland Innovation Park Awards and PubSummit in Cork, anyone would plainly see that the Irish tech start-up scene is buzzing with great activity and fantastic energy. These are only two examples of many such events across the country, with nearly 20 support programmes to help start-ups – some of which supported by Government through Enterprise Ireland. This is not the full picture, however, as this may only represent 25% of the tech start-ups in Ireland, where an average of 2.5 new companies are being formed every day. In this post we look at overcoming challenges facing early stage software companies.

Ireland has progressed a long way in the past 20 years, when the software industry was only getting started in this country. Enterprise programmes did not exist. There were very few colleagues in the industry, there was little internet access and international business travel was highly expensive, which made overseas sales very costly. There were very few sources of investment and most businesses started as services companies – they found their product ideas developed through a series of customer engagements. The transition from start-up to early stage was less clear, as businesses slowly transformed from one type of business to another.

Of course, not all start-ups become early-stage functioning businesses and many of these founders realise that being an entrepreneur is not for them. To move from start-up to early-stage requires market validation, paying customers, revenues, a growing sales pipeline and a business that looks like it has legs to grow.

The early-stage company secures investment to develop its product and its market. Over the past five years, Ireland has developed a fantastic network of angel investment syndicates, private investors and venture capital funds. Many of the private investors themselves are successful tech entrepreneurs, feeding their expertise back into the industry and delivering faster growth with their added experience.

Enterprise Support Systems

Ireland’s enterprise development and support system is the envy of many countries around the world and the support services offered by Enterprise Ireland are praised by many around the world. Any criticism of Enterprise Ireland typically comes from companies who do not fit into its defined brief. This is not to say that it does not provide support for out-of-brief companies, but they may need to work a little harder to make their voices heard.

Ireland has, however, a number of challenges in this structure. One such challenge is that many of the ‘accelerator’ and ‘enterprise’ programmes are underfunded and thus rely heavily on voluntary effort – these volunteers do not always have the relevant expertise to properly support the companies. Many strong tech projects and entrepreneurs are rejected and many poor projects are accepted (although of course, no one can predict what business will be successful).

Another great service that could benefit from improvement is the ‘mentor’ programme; the quality of the mentors varies so much and they do not always meet the early-stage growth needs of tech entrepreneurs. There is a challenge in matching the entrepreneur’s needs with the right mentor, or with finding top-quality mentors in the first place.

Early-stage tech entrepreneurs within the ‘accelerator’ and ‘incubation’ programmes benefit from group support to help each other get started in their business. Yet when the three- or six-month programme is complete, there is a sense that the entrepreneurs are then cast into the wilderness to fend for themselves. Of course, they must learn to be independent, but many need more help to develop further. Once a tech company moves into its early stage and leaves the grouped class environment, they enter into the real world of sales targets and everyday business challenges.

Overcoming Challenges

Being the founder of an early-stage company is both an exciting and challenging place to be. It is a great feeling to know that the market is interested in something you have created and that your company is a success. In order to have the drive, passion and long working hours required, you need to believe in your business and that what you are doing will produce great results.

The typical challenges faced by early-stage tech companies range across all functions of a business including:

  • Market and customer engagement – getting out into the market and start getting feedback as soon as possible to ensure you are on the right path;
  • Marketing and sales – understanding your ideal customer, what your customer is really buying and how best to market and sell to your type of customer;
  • Product development – to develop every part of your business, including your product, incrementally with constant feedback and adjustment from the market;
  • Team development – getting the right people for what the business needs at each stage. The founding team may be great at the start, but may turn out wrong very quickly with tough decisions and changes to come;
  • Financing the business – securing the necessary funding to meet the requirements of the business and the constant questioning, market testing and feedback that allows you to continually get better.

The personal challenges on the managing director/chief executive officer of any new tech business are great and this load can rarely be shared. In early stage, you are trying to achieve many things on very tight resources and considerable pressure is on the founding team to work very long hours, learn new skills and make the best of what skills they have. And all this must be done on small personal incomes.

If the business cannot pay the founders reliably and sufficiently, then the pressures among the team mount very quickly and changes are inevitable. Everyone may buy into the dream, but this does not happen without overcoming considerable challenges. A great dose of naivety is required to start any new software venture. We regularly need to forgive ourselves this naivety and push on. For a first-time CEO, it is a great challenge to adopt the ‘simplicity’ that is needed to separate personal relationships and business decisions.

Great changes can take place when a company takes on investment. You have successfully sold the vision of your business and made a commitment to deliver on the documented sales targets and return on investment. You now have a board of directors to report to and help develop the business. For so long, the fledgling company did not have the funds to hire the right people, invest in effective marketing and sales and deliver on your targets.

Growing Responsibilities

With the funds, you are now under pressure to deliver on targets and the CEO can quickly become caught in the middle:

  • Your board: you need to report to and manage the message to your board while taking full responsibility to deliver. There are many things you cannot discuss with your board and they expect you to work these things out yourself. Otherwise, you are the wrong person for the job, regardless of you being the founder.
  • Your team: although some may have been co-founders, things likely have changed. You need to lead and be decisive sometimes against the wishes of co-founders. As CEO, it is your job to create an environment for your team to deliver and thus you need to protect them from many challenges that you deal with.
  • Yourself:  you have clear goals for yourself and need to keep in mind that these are aligned to your company and your role in the company. You may have challenges in areas of your business that you are struggling with but do not have sufficient assistance or support within the company. Seek support from experts externally.

Being CEO can be a lonely place and takes time to become comfortable with this. As the saying goes, ‘It doesn’t get easier; you just get better.’

If enterprise development is defined as the development of our entrepreneurs’ capabilities and supporting them through the stages of their development, while seeking a shared knowledge, shared experience and camaraderie to continually better our industries, then in Ireland we do very well. But as with Ireland’s soccer team, if we are not always pushing to win, then we are waiting to lose.

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