How Green Is That Startup?

Working with startups is one of the most exciting opportunities in the high tech business world. As a product development partner in this arena, companies like ours come across potential ‘next big things’ on a regular basis. It’s stimulating, fun, horizon-broadening and impactful work.  Startups are often staffed with brilliant folks brimming with great ideas and enthusiasm – engaging with them is often a very different experience from working with large, long-established firms.

One of the great benefits of providing services to startups is having the opportunity to develop first-in-category products—tech hardware and software engineers, designers and marketers are all junkies for the bleeding edge. And that ‘edge’ is aptly named – companies who support the creation and development of new technologies as a part of their business model definitely know a thing or two about bleeding — especially when encountering difficulties getting paid for their work.  According to Forbes, the reality is that 9 out of 10 startups will fail.  Most often, of course, neither the startup nor those of us providing services to them can predict success or failure.  And who wants to embark on an exciting development adventure with a cloud of doom overhead? So we all choose to see the glass half full.  And even given the possibility of not succeeding, many startup co-founders and staff are intelligent, realistic and upstanding; they do everything in their power to make sure vendors are compensated according to original agreements.

But for those of who continue in service to startups, the question remains: how do we remain a positive force for new product development, support the startup in as many ways possible, while also preventing an onslaught of unpaid invoices? Thus far we’ve learned the following things – some the hard way, some from great experiences:

1)     Check references and backgrounds.
Do the principals in the startup have the credentials and support to take the product the full distance to market? Google and LinkedIn often provide good information and there is no harm in asking for references if you have any lingering doubts.

2)     Is the technology mature enough to come out of the lab?
Is what’s driving the new product proven technology? If it’s new, be sure that it has been thoroughly tested and validated – this goes for all hardware and software.

3)     Are the founders/inventors ready to let go?
There’s really nothing better than a startup client who is paying attention at every step. But while bringing in outside product development experts is an exciting and necessary step, your client has to be ready to give serious consideration to your advice, join in the tough decisions regarding design and engineering tradeoffs and  generally be willing to let go of some of the decision making processes. This is easier for some than for others and service providers should be prepared to encounter some resistance to it.

4)     Is it a believable business?
Do you believe in the eventual success of the product? Has the client presented a compelling use case for the product and business plan for his or her business?  If you are not convinced that these things have been adequately covered, are you comfortable expressing your concerns to the client? Perhaps you have some suggestions for making the product or business plan more viable.

5)     Create a clear definition of the “end” of each development phase.
All parties must agree on an understanding of what will have been accomplished at the end of each development phase. What will the product be or look like at the conclusion of each? What functionality will it have? Putting this in writing is important, but so is continuous, straightforward setting of expectations through ongoing phase reviews and conversations.

6)     Communicate clearly as to who is responsible for paying you.
Is it the VC? The owners? What if they disagree? Is everyone clear on the role of the investor(s)? As much as possible, get these agreements in writing.

7)     Show interest in and support the startup’s entire effort.
Do you have relevant experience with PR in the client’s market segment? Insights? Contacts? Share them. Make the effort to look at trade and general publications related to the product and send appropriate articles along. Letting the startup know that you care about the entire effort and are willing to show it goes a long way towards building long term relationships and successful endeavors.