After Facebook bought photography app Instagram, this added more steam to the technology business market for entrepreneurs and venture capitalists. The tech start up scene could have been powered by same day loans but instead it is propped up by venture capital loans that give it the steam it needs to charge ahead. What the Instagram acquisition showed is that the appetite in Silicon Valley for big ideas that can be converted into many users.
If you think you have what it takes to do a start up, there are several factors you need to consider:
- Is your idea big enough?: Start up ideas need to be large enough to scale. Instagram, Twitter and Pinterest are all social network start ups that have scaled with more than enough users. You need to create an idea that is for a specific market yet that has the ability to scale and volume. This works when you make your idea simple and add extra features as you go along.
- Selling your start up: The tech business scene is dominated by acquisitions. Companies such as Google are known for their ability to buy start ups and integrate them into their own companies. From the days of using fast cash loans to start your company to selling it to a larger company, tech businesses can have acquisitions as their end goal as this is one of the most popular exit strategies for the owners.
- How you will share equity: Who owns the majority shares of the company is important to decide especially if you are starting the company with other people who need to have equity. The great thing about shares in a company is equity can be converted into dividends which are another excellent way for start ups to give value to investors.
- Find investors: Tech ideas need plenty of cash to keep them running and this is why investors are needed. Investors can be venture capital firms or individual investors who then receive equity in the company. The advantage of investors in a company is that they give start ups the money they need to build the company. The top element to watch out for with start up investors is make sure they can offer you more than just money – experience and advice is crucial.
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Lakshmi Balu
September 6, 2012 at 1:28 pm
Technology business is something that seems vague to the geeks. The geek would prefer learning tech than to keep a track of the patent war (At least, I do) But here you have actually told things about the business which the technology start-ups should follow in order to sustain the competitions from the established firms, fund raising issues and faith of the stakeholders in investing in your company. Thanks Joseph, its some real important guidelines for tech start-ups.