Launching a High Tech Start Up

High technology start ups represent a special case of entrepreneurship because costs and risks are typically extremely high. After the crash of the dotcoms and the sharp decline in technology stocks in the early 2000s, people became leery of anything high tech. Venture capital declined significantly every year between 2000 and 2003 bottoming out at $12.9 billion during the first nine months of 2003. However, recent years have been a revival of high technology start ups. Companies launched during the economic slowdown encompass a range of high tech industries, from biotechnology to wireless networks. In addition Internet companies are making a comeback as entrepreneurs have learned from past mistakes and found innovative ways to succeed online. Just as with other small companies many of the high tech companies being started now will fail, but many others will go on to become highly successful. Small business formation is the primary process by which an economy recreates and reinvents itself and the turbulence in the high tech sector is evidence of a shifting but thriving US economy.

High tech start ups face many of the same challenges as other small businesses. However, they may also face some unique issues and problems. In this section we will examine what is involved in launching a high tech start up based on what is known about these companies so far.

Starting with the idea:

As with small company, an entrepreneur has to have a viable idea for the business, and one that is appropriate to the fast changing world of technology. Dan Avida and Serge Plotkin hope they have an idea that will create a thriving business. Their company Decru, provides a fast and easy way for companies to make all their network data accessible to authorized employees, customers and business partners but keep it safe from unauthorized users. Decru’s custom made processor encrypts and decrypts at lightning speed, which gives it an edge over competitors.

However research has found that the chances are only six in one million that an idea for a high tech business eventually turns into a successful public company. Entrepreneurs have to get out into the marketplace and talk to potential customers to learn whether their idea is something that can meet current and future needs. Start ups have the advantage of being nimble, the idea itself must be flexible enough to allow rapid movement as the environment changes.

Writing the business plan:

With the lightning fast pace of the high technology environment a traditional business plan is usually obsolete by the time it is written. High tech entrepreneurs have to create a compelling story about why their idea is the seed of the next success. The entrepreneur has to convince venture capitalists and potential employees to join in a risky adventure that has huge potential but few guarantees. Venture capitalists say they prefer short business plans because they have so many to read. Therefore the entrepreneur has to keep the story compelling. The plan should cover eight basic points:

1) A description of the business and why it is unique
2) A profile of potential customers and market needs
3) The key ingredient of the business that will attract millions of customers
4) Why customers will buy from this company rather than competitors.
5) What the company has accomplished so far, including partnerships or early customer relationships
6) The entrepreneur’s background and role in the company.
7) Specific date about where the company is located, key management people and contact information
8) Essential information about funding received so far, funding and staffing needs and expectations for growth of the business over the next year.
Source: New Era Marketing