So you’re interested in starting a tech? Then you have to figure out what it is that makes a tech startup unique from, say, a software start-up. After all, every start-up has to differentiate itself somehow to stay on the competitive front. The truth is that each type of business will have its own advantages and disadvantages. So let’s find out how to properly begin a tech startup by looking at various factors, benefits, and circumstances under which other tech startups will most successfully compete against existing large competitors.
There are three distinct types of business models in the technology world, including lean startup, vertical, and SaaS. Tech startups may use one or more of these models to distinguish themselves, but the differences between the three types become clear when you analyze the similarities and differences among the lean, vertical, and SaaS types. A lean startup is similar to many traditional small business models in that it requires customers and resources to be developed prior to offering full-scale products and services. The difference with a lean startup is that customers and resources will be developed on-demand, as resources are brought on board at a moment’s notice.
A vertical or a “vendor-private-partner” approach to technology startups provides funding, resources, and support to existing large companies. Typically, most of the funding will come from a number of smaller investors that provide partial or full equity. This differs from a lean startup in that resources will not be required upfront, but funding will likely come in the form of a loan from a number of investors. For this reason, most venture funding sources expect a successful venture to have a strong business plan. Most VCs look for a strong leadership team and a track record of success.
The final model, a SaaS service, is an interesting choice for start-ups new to technology. A SaaS service offers a way to convert a business’ CRM or ERP system into a cloud-based service that can be accessed by customers via the internet. This lowers initial start-up costs and makes it easier to expand into other markets. For start-ups like this who have limited resources, but want to take advantage of cutting-edge technology, a SaaS service may provide the best place to start. Although this model does require the creation of internal technical infrastructure, it is one of the best options available.
There are several ways to differentiate yourself when you’re seeking angel investment for your tech startups. The best strategies are usually rooted in your vision for what your business can do and how you plan to use the internet to leverage this. If you want to raise capital through an investment vehicle like a venture fund or a private investor, your strategy should be backed up by solid numbers that clearly show you’re having a significant impact on the market through market development and marketing. Venture capitalists also recognize the fact that entrepreneurs are almost always on the hunt for new and creative ways to grow their businesses.
In conclusion, many of the best angel investors are rarely the people that give away cash. They generally have a very specific idea of what they want to see in return for investing in your company. Angel investors are much more willing to take risks with new technology products than venture capitalists. However, there are times when the risk you need to consider is higher than the reward you can expect. If you think you’re ready to move into the startup market, consult with an angel investor first and define exactly what kind of return you’re expecting before seeking outside capital.