Okay, you want to start a high tech dotcom business. No, it’s not as risky as it seems, even with the horror stories out there, but there are critical items that need extra attention at the startup of your business. Ignoring these will automatically result in failure. No slack, just failure.

Many high tech businesses begin with a patent or idea generated while working for another firm. Good sense helped you accomplish the first tasks of clearing all of the legal details with your present employer, constructing a great business plan to attract an Angel group to fund the first round, and getting your bank to lend some of the startup money based on your credit history. You may also have your present employer locked-in as your first major customer (and they may even help fund the new business). This is a typical scenario, but it leaves out a tremendous amount of startup material you absolutely must address if you want to succeed.

THE CHALLENGES
After the basics have been met, your next questions should be: "Have we thought of everything? What problems and challenges can arise that we should be on guard against?"

There are three major problem areas that stand out among high-tech firms (or for that matter just about any firm), problems which are major contributors to failure if ignored. These include problems dealing with basic management of the firm, problems dealing with finance, and lastly problems associated with understanding the basic marketing concept. Here’s a brief overview of these along with suggestions.

MANAGEMENT
According to the US Small Business Administration, almost 90 percent of all business failures are caused by a poor, ineffective, or incompetent management. A manager must have extensive knowledge in many disciplines. Specifically, poor management can include a failure to practice good basic bookkeeping and accounting, unwillingness to cope with the day-to-day challenges of running a business, inability to get along with employees including promotions through friendship and nepotism rather than qualifications, not understanding customer needs and requirements, not understanding the competition, and not having workable marketing plan. All of these are part of management’s responsibility to the firm.

One answer to solving this challenge is to hire professionals to manage your firm and not try to perform these tasks yourself. Chances are your Angel group will want to supply some of this knowledge, but keep in mind their goal is to generate a 25% profit from their investment and to bail out at the next round of financing. Your talents lie in the engineering, design, manufacturing, or marketing of your product (or idea). Don't dilute these skills with tasks best left to others.

FINANCIAL
It is becoming evident that the majority of high-tech start-ups have serious financial problems from the day they start operations. The largest money challenge is because the venture was undercapitalized, the firm took on too much beginning debt, or the firm developed an adversarial relationship with the Angel group/venture capital/parent company partner.

To meet these financial challenges, consider raising the match capital often required through an initial stock offering rather than personally borrowing the money. This will lower the debt load at start-up and permit a time cushion before you have to start generating income. Spend a lot of time with knowledgeable people on your financial plan before you begin. It will pay off big time!

MARKETING
Not understanding the marketing process is a problem in almost 100% of the high-tech firms with which we have worked and studied. The problems often begin with a dependency on a parent firm for business, and when that business drops off, so does the high-tech firm. Other marketing challenges are related to product design, timing of the product offering, distribution channels, packaging, promotion, pricing and in general, not having a distribution or selling network in place.

To meet the marketing challenge you first need a comprehensive marketing plan prior to your start-up which addresses both the current and future market of your product and its potential spin-offs, and you need a marketing manager that truly understands how to market. Remember, you must concentrate your energy on your expertise area and leave other tasks to experts in their area. It’s a must for success.

(NOTE TO EDITORS: PLEASE INCLUDE THE FOLLOWING.)
Paul Tulenko is a Small Business Success Consultant based in New Mexico. Additional tips and suggestions are available at www.tulenko.com or call (toll-free) 1-866-TULENKO.