Growing a startup into a fully-fledged business is far easier said than done. It’s estimated that roughly 9 out of 10 startups fail. Therefore, it is necessary that you go one step at a time and be very careful not to overlook something.
Tech startups, more specifically, face certain challenges that other types of startups might not always have to worry about. First of all, the competition is quite high in this field and tech keeps on improving quickly, which means that you need to stay in touch with what’s trending all the time and adjust your company to the needs of the market.
Whether you’re a CEO or a key decision-maker at your budding business, here are five tips that Canadian tech startups should keep top of mind.
1. Take Advantage of Unique Tax and Funding Opportunities
Many businesses, particularly those that are relatively young, encounter problems with cash flow—and this is not unique to tech companies.
However, tech companies are often required to invest a significant amount of capital into research and development in order to create, improve, and perfect their products.
This is where cash flow becomes an issue. Fortunately, there are also different kinds of tax and funding opportunities for Canadian tech companies.
In Canada, one of the primary tax incentives for technology-related ventures is the Scientific Research and Experimental Development (SR&ED) program. This program provides tax credits to companies that are investing in the development of new products and technologies.
With a lender such as Easly, your tech startup might even be able to get an advance on your SR&ED tax credit, receiving up to 75% of its total amount.
2. Hire a Law Firm That Will Defer Fees
As you’re working to grow your business, you’re undoubtedly going to need legal services along the way. But again, as your tech startup may be working with limited resources at this stage, you may find it difficult to find the money to pay for legal fees.
Fortunately, there are law firms that will offer specific programs for startups and even allow you to defer legal fees up to a certain amount.
In this type of scenario, the incentive for the law firm is often a larger payout. While fees might be deferred until you’ve raised investment capital, the firm might require a certain percentage of your business’s equity going forward. Particularly if your business explodes, this could result in a handsome payout to the law firm.
If your startup could use what money you do have in other areas, strongly consider working alongside a law firm that will defer fees.
3. Establish Good Culture and Hire Slowly
Culture is more than just a popular buzzword—it’s an element that most successful companies have in common.
One study reports that 88% of job seekers see culture as being at least relatively important and 46% see it is being very important.
When your business fosters the right culture, you create a workplace that motivates people to work hard and become a key cog in what your business is looking to achieve.
Similarly, you want to make sure you hire the right employees. While you have little help, you may be tempted to go out and make a handful of fast hires; but early on in your startup’s life, hiring employees will be some of your most important decisions.
Don’t feel pressured to hire all of your employees at once. Take your time making each hire to ensure that you’re identifying the right person for the job.
4. Use Company Equity to Your Advantage
As a new tech startup, prepare to be viewed as a risky endeavor to investors and employees alike. At first, the reality is that you might struggle to get the funding you need or the employees for your team.
While you may not be able to win over investors with your numbers to date or woo employees with large salaries, you may be able to offer equity in your growing company as a unique incentive.
Of course, it’s also important that you offer equity sparingly. Especially if you have aspirations to grow your startup into a large company one day, consider how much a percentage of your business’s equity might be worth in the future.
This is a risky move for you, but it is also risky for the investors. Still, this might be the only way for your tech startup to grow and develop. It might be hard to give up on one part of your company, especially if you’ve developed the idea.
However, if you find the right people, who are ready to invest and see this idea through, you will have nothing to worry about. All of you will be working on a common goal and that is to grow your startup.
5. Don’t Just Work in Your Business—Work on It, Too
Many leaders at tech companies have technical expertise and are most passionate about innovation and new products.
Particularly if you’re a leader at a startup or small business, you might find yourself immersed in your products and services, taking on much of the workload in developing them early on.
However, this can cause other important business components to become neglected. Your business’s vision, finances, long-term goals, and current trajectory are largely your responsibility and shouldn’t be ignored.
If possible, entrust your team with more of the day-to-day development of your products and services, and be intentional about spending more time building your business.
Tech startups are facing difficult challenges, and hopefully, these tips will help you out a bit. It isn’t much and it will not solve all your problems. Of course, running a startup is much harder than reading and writing about the issues they face. So good luck!