Risk Management Strategies for Tech Startups

According to the Bureau of Labor, two out of every 10 businesses fail within their first year of operation. If you’re launching a tech startup, you’ve probably heard a variety of other statistics. Maybe you’ve even done your research and have heard things like 90% of new tech businesses fail, even if that number tends to vary depending on where you look.

A new business venture can feel overwhelming in today’s competitive and fast-paced market. The digital age has led to benefits that didn’t exist in decades past, but it has also saturated the tech industry. However, it’s possible for a tech startup to find success without focusing on fear.

Instead, focus on risk management strategies that will help you develop a resilient tech startup. Beyond that, foster actionable strategies for risk mitigation and long-term success. Launching a strong startup is about more than just thinking about the present. It’s about looking at the risks down the road and putting plans in place to keep your business and your bottom line safe.

Identifying Your Risks

There are some common startup risks that are universal no matter the business you’re trying to launch. The biggest, perhaps, is the risk of failure. Most startups don’t launch without some precautionary measures in place, but businesses can still fail to get off the ground for a variety of reasons. Before you step into any industry, preparing yourself for a hostile market should be a top priority.

Other common risks new businesses face include:

• Lack of demand;
• Volatility of the market;
• Financial problems;
• Poor management.

There are also potential legal issues to consider, from claims of false advertising to employee misconduct. Human error is also a risk, especially when your hiring pool is slim or you aren’t taking steps to adequately interview and vet the right people. Being able to attract and retain top talent is essential for every industry. If you get the wrong people involved, they could end up sabotaging your business, either purposely or simply because they don’t have the right skills for the job. 

In the tech industry, specifically, additional risks can often come into play when you’re getting started. Things like competition can make it difficult to get ahead in an industry that feels saturated. You’ll also have to deal with regulatory hurdles, cybersecurity issues, and the risks that come with data collection and storage.

Mitigating Startup Killers

Once you have a clear idea of the risks, you can start putting together a strategy that will make your tech startup as risk-resilient as possible. That starts by making sure your business idea is something that’s either in demand or something new that people can benefit from.

You should also focus on something that has a low financial risk, so you’re not investing thousands of dollars into a new idea right away. In fact, one of the best ways to mitigate the financial failure of a tech startup is to launch from home. Some of the best home-based tech startup ideas include:

• Offering remote IT services.
• Mobile app development.
• Web application development.
• EdTech.
• E-commerce.
• Video game development.

After starting your business, you can give yourself time to research the market, create a strong business plan, and finally launch your product or service on your terms using things like landing page ads, influencer marketing, or press releases. After your launch and initial success, you can focus on scaling up.

Developing a Long-Term Safety Plan

As you continue to grow, your risk management strategies will shift. One of the best things you can do as your startup gains traction is to develop a contingency plan. A contingency plan can keep things afloat if you run into an unexpected loss of customers, funding problems, or even a data disaster. Your contingency plan should include, first and foremost, strong cybersecurity practices.

Cyberattacks happen with even the largest and most successful conglomerates. While you might not be able to completely stop cyber criminals from getting in, prioritizing protective measures and developing a response plan will make it easier for your business to bounce back if an attack happens. Things like using cloud-based backups, developing strong passwords and authentication practices, and educating your employees on how to keep themselves safe are all great ways to protect your business from hackers.

A successful contingency plan should also cover unexpected accidents and incidents. If someone gets injured on the job or your company gets sued, a strong insurance plan needs to be in place to cover legal fees and damages. If a disgruntled employee tries to take legal action, your hiring contracts should have precautions in place. Finally, an emergency response strategy should be included to limit the time it takes to bounce back from any potential setback. When you’re starting a new tech business, your focus will likely be on the excitement of launching a new idea that people need to get their hands on. But, if you truly want to see successful growth and increase the likelihood that your tech startup will be around for a long time, don’t ignore the potential risks you might face, and don’t hesitate to come up with a specific plan that fits the needs of your business.

ABOUT THE AUTHOR

Katie Brenneman

Katie Brenneman is a passionate writer specializing in lifestyle, mental health, education, and fitness-related content. When she isn't writing, you can find her with her nose buried in a book or hiking with her dog, Charlie. To connect with Brenneman, you can follow her on Twitter.