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You deserve to pat yourself on the back — after all, you just launched a brand new startup, and so far the business is thriving. You may even feel tempted to invest in the latest and greatest technology.
Before you spend all of your hard-earned money on that fancy new server, though, consider whether you really need it. Research of startup businesses that don’t work out indicates 70% fail because of premature scaling.
What Is Premature Scaling?
A report by Startup Genome defines premature scaling as “focusing on one dimension of the business and advancing it out of sync with the rest of the operation.” This could mean investing in specific resources beyond your means.
Basically, you want to avoid driving your business into the ground by overspending — and that includes on your tech setup. Those technology companies that keep offering you their services are looking out for their own best interests — not necessarily yours. Don’t be afraid to press the “ignore” button the next time one of them calls.
Here are three high-tech upgrades that may seem tempting, but your startup probably doesn’t need them (at least, not quite yet):
1. An Expensive Custom Platform
As you begin to run your startup, you’re probably wondering what type of software your company should use: pre-existing software or a custom-built platform.
Sure, eventually you may find that off-the-shelf software just doesn’t meet your startup’s needs. In fact, a recent survey found that 66% of businesses plan to invest in custom software solutions over the next five years.
That doesn’t mean you have to jump the gun and build your own custom platform right now, especially if your cash flow is still low or you’re short on time. Pre-existing software can be affordable and easy to implement, so it’s best to start with this route — at least in the beginning. As time goes by and your business gains more revenue, you’ll be in a better place to evaluate whether custom-built software will truly add value to your company.
2. Brand New Network Equipment
You may have heard that computer networks are designed to last fewer than five years — but more and more tech firms are reporting that just isn’t true. In fact, most computer network equipment can last up to 10 years, sometimes even longer, especially if it’s well maintained.
Unfortunately, many original equipment manufacturers (OEMs) may pressure you to invest in costly upgrades before they are necessary. OEMs may even phase out a current product to get you to upgrade.
To avoid this trap — and to keep your network equipment costs affordable — consider teaming up with a third-party network supplier. You’ll reap the benefit of comprehensive system support, and you won’t have to contract with multiple vendors who don’t have your best financial interests at heart.
3. Prime Real Estate
Many analysts insist your business has to be in Silicon Valley to succeed in the technology industry. After all, the Bay Area is the tech center of the world.
However, before you pack up your equipment and move your staff to California, give careful consideration to the potential disadvantages. You may think your business has a better chance of thriving if you’re around all those like-minded techies, but you’d also be subjecting your startup to intense competition — and are you really in a position right now to rent Silicon Valley office space?
As more and more cities develop their tech ecosystems, you can come up with creative ideas and solutions from anywhere around the world. Plenty of startups — like Voices.com (New York, London, and Ontario, Canada), SendGrid (Boulder, Colorado) and Tailwinds (New York and Oklahoma City) — have found success outside of the famous tech mecca.
Keep a Flexible Approach
One of the major benefits of launching your own startup is continued flexibility.
Just because it’s not the right time to invest in expensive tech upgrades right now doesn’t mean it won’t be a good idea a few years down the road. As you develop your startup, keep an open mind, but stay focused on those things that may be more important in the short term, like building up your staff.
After all, there is more to life than fancy technology — even though the moguls in Silicon Valley may tell you otherwise.
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