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3 reasons tech startups fall into a death spiral

Munira Rangwala
24th Apr 2017
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Several tech startups tend to reach a point where their efforts bear dwindling returns. There will be times when you'll put in copious amounts of hard work to no avail as your customers just won't bite. This often leads to a death spiral which is more dangerous than failure itself. A tech startup can be jinxed in a variety of different ways, but the three ways listed below lie at the core of many others.

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Incorrect customer segmentation

The one thing that makes entrepreneurship unnecessarily filled with strife is chasing the wrong type of customers. Imagine hitting the gas and brake pedals at the same time. You might pick up speed but everything you do thereafter is bound to suffer from useless friction. Successful entrepreneurs are always mindful about the customer segments they choose. According to Evan Macmillan, Founder of conversational artificial intelligence company Gridspace and Co-founder of Zappedy, “A lot of companies struggle because they go after consumer problems using far-fetched technologies. Then there's the double risk that the tech never delivers on the promise and that it doesn't meet the whims of consumer taste,” as stated by Entrepreneur. Tech entrepreneurs need to ensure that they have a significant market and an incredible way to stand out to avoid falling into the death spiral.

Gradual iteration with customers

Several tech entrepreneurs are gradually realizing the importance of continuously bettering their ideas with feedback from the market. Zor Gorelov, Co-founder and CEO of Artificial Intelligence company Kasisto, faced problems in this area as his target customers are banks and therefore experimentation went slowly at first. As a solution to his problem, he launched a product called MyKAI that allows users to experience conversational banking first hand. However, instead of waiting for customers to utilise his full solution for themselves, Zor went to banks and showed everyone how his software performs with his own customers. Similarly, tech startups can create a small, more realistic version of their technology to lure potential customers. The goal of doing this is to learn faster and not worry about revenue.

Customers who consider technology worse than its alternatives

As a tech startup, you're bound to have a passion for solving problems with the help of technology. However, your customers don't view it the same way. Where you see amazing and new ways to do things, your customers see integration horrors. Your customers weigh your quick fixes against how they already do things, namely, their alternatives. According to Evan, “At the end of the day, if what you do can't be measured against an alternative, it's very hard to show you're making progress.” It is therefore advised to make your value propositions measurable. If you fail to make them measurable, you unconsciously put a curse on your sales process.

The more you rely on technology, the more solid your solution must be to all the points mentioned above. Or else, you're bound to fall into a death spiral.

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