MBA2503 Why You Should Never Start a Tech Startup

0:09Heyo, welcome to the$100 MBA show where you get practical business lessons for the real world. I'm your host, your coach, your teacher, Omar Zinhome. And in today's lesson, you will learn why you should never start a tech startup. As someone who started, grown, and sold a tech startup webinar ninja, I've experienced firsthand the unique challenges that come with it. In today's lesson, you could see this as a warning of what to expect if you decide to venture down this path, if you decide to build a tech startup. Don't get me wrong. There are a lot of positives, and I love my 10 years of experience building and growing Webinar Ninja.

0:48But it is not the easiest business to start. In fact, it's one of the hardest businesses I've ever had to be a part of. And I've run e-commerce businesses, events businesses, coaching, digital products, memberships, you name it. If after today's episode, after you've learned about all the things you need to look out for, you're still motivated, you're still eager to start a tech startup. up, then at least you know what you're in for. So let's get into it. Let's get down to business. As we get started, I just want to be super clear, super transparent. I have zero regrets about starting Webinar Ninja.

1:23It was an incredible experience. And because it was so hard and so challenging, it forced me to become better as a person, as an entrepreneur, as a thinker, as a creator. And despite the fact that it was super challenging, I am glad that I went through that experience. But let me tell you, it's not the easiest way to make a buck with a business. Let's start with challenge number one. Despite what people say and despite how amazing technology is these days, there is a higher initial investment that you need to make to start a really good tech startup. From developing the product, to marketing, to hiring a team, to the infrastructure the tech demands, the costs quickly add up.

2:07And you can triple these costs if you are not a tech founder, meaning that if you don't know how to code your own app, not that you'll do all the coding, you're going to need other developers as you start to scale. But if you don't have the tech background where you can correct somebody's work, you know how the ins and outs of your app work, then you're going to need to hire some serious experts. They're going to cost you money. When we started Webinar Ninja, the initial development alone cost us tens of thousands of dollars from hiring skilled developers, designers, marketers. It was a major financial commitment.

2:41And that's why we actually pre-sold Webinar Ninja so that we can make this money to hire for these people. So despite what people might think, oh, you know, it's cheap to run a technology company or startup. You can just, you know, spend as much as you use. But here's the thing, creating the app, hosting it on servers, this needs to happen regardless if you have zero customers or 10 ,000 customers. So you're going to be spending money before you even have your first customer. This is not to mention all the other pieces of software you will need to just run a technology company, whether it's project management software or ticketing software like Jira or monitoring services like New Relic to make sure that your app doesn't go down or you have a warning system, whether it's cybersecurity software.

3:27I mean, if I look at my P &L sheet, my profit and loss sheet from Webinar Ninja and look at all the tools I had to have to keep my business running, it was eye-watering. Challenge number two, consistently evolving technology. When you're in the tech space, you need to know something. Technology is always changing. The technology that was best for my company, Webinar Ninja, when I started out back in 2014 is not the best two years later, is not the best five years later. What's cutting edge today can be obsolete tomorrow. And you need to keep up with these changes. This requires continuous learning, continuous adaptation, which can be both time consuming and very expensive.

4:04For example, you might be building your app on one technology, then all of a sudden, two years later, that technology is not as robust. It's not being updated. It's not the best technology to use for your application or for what you're using it for. So you need to switch to a different technology. So you're future-proofing yourself. That switching is very costly. Your developers have to redevelop the code. It's called refactoring the code. There might be some downtime. There might be some bugs in the process. Your customers are going to get upset, but there's nothing you can do. You need to move with technology so that you're not working on obsolete software, obsolete tools.

4:42We had to consistently update and improve Webinar Ninja to stay competitive. This meant investing in new technologies constantly, redesigning our features, and sometimes even overhauling our entire platform. We had to redo our platform probably a total of three solid times. And there's some micro times, there are micro instances there, but three times we had to redo our whole app in a new technology over the course of 10 years. But you don't have a choice. You have to stay ahead of the curve. It's very exhausting because you have all this sunk cost fallacy, meaning that you have this feeling of, man, I invested all these years and time in creating this app using this technology.

5:23We fixed all these bugs over the time in the last three years, but now we have to overhaul it and change it completely? Yep, you do. Challenge number three, intense competition. When we started Webinar Ninja back in 2014, we had about two, maybe three competitors. And the third competitor was not really a competitor, It was more like a meeting app. It wasn't a webinar software. And in just five years after we launched, we had over 80 competitors. 80 competitors. The tech industry is fiercely competitive. There's always a new startup emerging and there's always new companies being established trying to innovate on what you built.

5:59They're trying to stand out from the market and take your market share, whether offering your product for less money or offering better features than you or just being better at marketing. and even if they have an inferior product, they just out-market you. So you actually have to act like you're just starting out every day. Every day you wake up and you build and work on your startup, you have to act like you're a new player and how am I going to innovate and how am I going to stand out from the crowd and how am I going to make a splash in the market and take somebody else's lunch? You also have to learn how to differentiate yourself from the competition.

6:34We had to do this at Webinar Ninja. We thrived ourselves on making sure our software is for small businesses or small teams, people that had a team of less than 10 people. This means that the software was easy enough to use by yourself. You don't need a whole production team. You can run the whole webinar and handle all the features and all the interactivity just by yourself without needing somebody backstage, so to speak. We also really focused on customer support because we noticed that the other company's customer support was horrible. We were competing against well-funded startups. We were bootstrapped.

7:08We're competing against established giants who had millions and billions in revenue every year, and it's a relentless battle. So you better have some strong coffee in the morning and a good breakfast because it's going to be a long day. Before I move to challenge number four, I want to take a timeout. I'm not trying to discourage you here. I'm trying to give you the reality. I wasn't given this reality when I started Webinar Ninja, and I thought I was, you know, not cut out for it. I thought that maybe there's something wrong with me. But then I realized, oh, this is how hard it is. This is what it's supposed to be like.

7:39I talked to other startup founders, and they're like, no, no, this is par for the course. This is exactly my experience as well. So I want to give you the raw truth so you know what you're going to be facing. So challenge number four, technical challenges. Okay, running a tech startup means dealing with technical issues on a daily basis. There is no such thing as a software that's bug-free. As soon as you start developing a piece of software, adding features, making it better, and these are all a part of the game, your job is to make your startup, your software, as reliable as possible without sacrificing innovation, without sacrificing updating and improving the software constantly.

8:19There will be problems. And what happens is that as a tech startup, you have to start triaging your bugs, meaning which bugs really need fixing and which bugs don't really need to be fixed. I can fix them later on when I have more time or they're not even worth working on at all. Some bugs don't really affect the experience that much. They're not even front facing bugs, but they're spitting out errors on the back end. Some bugs are a little worse, but there's workarounds for the user. And then there's some bugs that are non-negotiable. We got to fix these because they actually hurt the experience in a major way.

8:52We were not immune to this at Webinar Ninja. But one of the things that we did as a practice is we asked our customer support team, what are the reoccurring things you're hearing from the customers, the issues that they're facing? And let's just fix those first, because those are the ones that are really causing you problems as agents, but also our customers. And we were rigorous about this, meaning that we wanted to make sure bugs were fixed in an efficient fashion and we're pushing out updates constantly. But here is the thing. You can't focus all your time on bugs. You need to focus some time on new features, on updates, on improvements, on making the product more efficient, more cost effective for you as a company.

9:29You need to build things out for the future to be able to scale to more users. There's other things you need to focus on in terms of your business growth. So again, you got to triage your bugs, which ones are the ones you must fix and which ones you can just forget about and which ones you could do later. All right, challenge number five, burnout risk. I've seen this so many times. I've seen it in myself more than once in my 10 years of Webinar Ninja. Running a tech company is demanding. It's very intense. There's long hours. There's high stress. There's a lot of pressure to perform, and it can take a toll on your health and your well-being.

10:03Now, I know that there are some tech startups out there, some independent creators that kind of have a quasi-lifestyle business, And that's okay, but there's going to be limits to that business, meaning there's only so much money you can make. And the value of a company can only be valued at some level of value. But if you're looking to be a market leader or one of the market leaders, a company that helps tens of thousands of people, makes millions of dollars year in, year out, is worth multiples, where if you sold the company, you would never have to work again. That is a high pressure kind of startup environment.

10:38And that's the environment I was in because I wanted to beat my competition. I wanted to create a great product for our audience. I wanted to make sure that when it's all done and dusted, I had no regrets, which I'm glad to say is true. And that's what happened. There's going to be times in this journey where you're going to feel completely burnt out. You're balancing all these departments as the leader of your company. You're balancing products, developments, customer support, marketing, business growth. It all for you to be mindful of this and take the time off you need to rest and to be mindful of your mental health on a daily basis, whether it's waking up a little bit early to get some fresh air, go for a walk, read a book, get some perspective.

11:19Lastly, challenge number six, scaling difficulties. Scaling a tech startup is not just about increasing your customer base, getting more customers. It involves scaling your infrastructure, your team, your processes. When you are starting out, let's say you're a team of five people. Let's say like a CEO, a COO, a CTO, a developer, and a designer. Let's say that's the five people that start your tech startup. The things you need to keep your business running, the processes, the tools, the infrastructure, it's quite simple. And you need to keep it simple because you need to keep it low cost. A lot of people think, oh, tech can just scale on its own.

11:55No, you got to build an infrastructure that's costly, that scales on its own, that scales with no downtime. In the beginning, when you have no customers, you really don't need all that. So you don't need to spend all that. But eventually you will. You will need to build out that infrastructure, that server infrastructure, that tooling infrastructure. You need to build out your team. You need to find great talent. And I'm going to talk about this in a moment. But in software, in tech, it's all about the team. The best team wins because the best team creates the best product. We'll talk about that in a second.

12:25But you got to scale your team, your processes. When you have five people and somebody needs to take leave, that process is pretty simple, right? But when you have a team of 30, now you need to have a system where people apply for leave. They have a certain number of leave days. It's a whole different thing. It's a whole HR department, right? So you need to think about how you're going to scale your business and scale your team, scale your processes each step of the way. For example, as Webinar NinjaGuru, we had to scale our infrastructure to handle more users. We had to invest in more robust servers.

12:57We had to hire staff and team members every single year. And we had to implement new processes and operations to handle that growth. And each stage is challenging. It's not like it gets easier or harder. Each stage is challenging, has its own challenges, and requires you to be careful in the decisions and the execution of those decisions as you grow. Now, given these challenges, these six challenges that I just talked about, let's recap. One, high initial investment. Two, constantly evolving technology. Three, intense competition. Four, technical challenges. Five, burnout risk. Six, scaling difficulties.

13:36So given these challenges, here are a few pieces of advice if you're still considering starting a tech startup. Be financially prepared. You don't want to start out on the back foot, okay? So if you're bootstrapping, which is what I did, see how you can start making money as soon as possible from your product, whether you're pre-selling it or you're taking just annual contracts, not monthly contracts, so that you can give your company a boost of cash. Number two, stay adaptable. Embrace the constantly evolving nature of technology. You have to be comfortable with the fact that you're going to scrap a lot of your code at some point to create new code and make sure it's better and better.

14:15Number three, differentiate yourself. Make sure that you have a unique angle or feature set or a signature move of your business. What are you known for? Number four, build a strong team. I mentioned this just earlier. The team that has the best team wins. I know that sounds funny, but it's true. In tech, it's all about the team. The better your talent, the better the people that are working on the product. The product's going to be better. The support's going to be better. The marketing is going to be better. So from day one, build the best team possible. A players. Number five, make sure you keep your stress in check, manage it, prioritize your health, your wellbeing, take breaks, delegate tasks, and seek out some help if you need some help.

14:54And number six, plan for scaling. Think ahead about how you're going to scale your infrastructure, your team, your processes, and have a plan for each stage of your growth. Starting a tech startup is not for the fainthearted. It's challenging. It's high stakes. It requires resilience. It requires adaptability. It's a lot of hard work. but the rewards are significant. If you get it right, if you actually build something of value for people, it could be a journey worth taking, especially now that you have your eyes wide open with all the challenges that you may face. Thanks so much for listening to the$100 MBA show.

15:30If you love what you hear, make sure you hit subscribe or follow on your favorite podcast app or on all the apps, Apple Podcasts, Spotify, you name it. It's the best way to support the show by hitting subscribe or follow. And if you like while you're at it, give us a star rating, or review and let us know what you think of the show. Before I go, I want to leave you with this. Now that I've sold Webinar Ninja, my life is very different. I wouldn't say I'm not working less or not as much, but I definitely would say I'm less stressed. There's a lot of responsibility and there's a lot of things to think about and to juggle in your head when you're the leader of a tech startup.

16:05Mostly, I was thinking about how all my decisions would impact our users. We had lots of users, 30 ,000 users, 10 years of this experience, you know, it takes a toll on your mental health sometimes. But I had a really good group of friends and I had a great network. And of course, I had a great partner, Nicole, who helped me throughout the way and was supportive. And luckily, when I was down, she wasn't down and vice versa. So we really helped each other out and we survived it. And we have lived to tell the story and so glad that we went through that experience. But I would say, yeah, the stress is the toughest part.

16:39All right, guys, I will check you in the next episode. Until then, take care.