Profitable Growth Should Not Be A Tech Outlier

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In the fast-paced world of tech startups, the narrative often revolves around breakthrough ideas, advanced technologies, and rapid growth. These are simple elements that start a startup's journey, but in the excitement, an important element is often overlooked: proving the effectiveness of the business model.

Many companies focus on growth without first understanding whether they have a viable business model. There are many examples of companies that have adopted this approach, but for most startups, it is easy to lose focus on your mission and goals of increasing market share. Many companies are busy raising money and the standards imposed on you may not align with your company's long-term vision.

What prevents startups from turning a profit quickly?

Profitable growth can be rare in the tech startup community for several reasons, often stemming from the unique dynamics and challenges of the industry. Tech startups place high value on scale by focusing on the number of users and the number of customers (i.e. paying users) – but this can distract founders from prioritizing profitability.

Likewise, early adopter advantages and the resources needed to acquire users quickly can lead to significant sales and marketing expansion costs as well as decreased profitability. Many technology startups achieve market acceptance for their products, but fail to find a monetization prototype. They can prioritize growth to attract investors and take profitable deals to the next level.

Another common problem is the short-term thinking of many startups. Companies that prioritize rapid growth risk losing interest from their core customers, having difficulty competing with free alternatives, and ultimately being unable to properly monetize their products.

Venture capital: why and to what extent?

We can select investors who provide the essential ingredients needed to take the business to the next level, ensuring our sustainability as a non-funded company. When you find strategic and cultural fit with your investors, you can build a partnership built on shared goals, trust, and effective communication, giving you a greater chance of achieving a successful, win-win collaboration.

Once you have decided to look for foreign investment, the next step is to decide how much you will take. Numbers are crunched and formulas applied, but the real question can get lost in all the calculations. What do you do with the money?

I think companies should also think about “venture capital”. For me, this means having enough money in the bank to make tough decisions and being able to maintain big strategic bets without setting artificial deadlines that force us to make unknown decisions when raising money.

Venture capital ultimately acts as a catalyst for strategic growth. This allows companies to invest in innovation, expand their markets, develop production lines and expand their operations. Most importantly, it allows startups to confidently pursue opportunities without sacrificing profitability.

Building is the five keys to profitable growth

• Build a business, not just an idea: The startup tradition romanticizes the frivolous, but today's best businesses are built on understanding the value of your idea. Who are your customers, what are they willing to pay and how much are they willing to pay? Focus on business results, not just product creation. Set a clear path to profitability, demonstrate disciplined costs and set appropriate prices for your products.

• Grow Strategically: Be strategic when growing your startup. Use your investment capital to expand into new markets or add new products or services, but not at the expense of existing markets. Without the necessary infrastructure, hasty expansion can damage assets and hurt profitability.

• Listen to your customers: Regular users of your product will tell you where the value lies and what future opportunities are. From there, you can safely grow your business.

• Bringing development founders: Just as startups need visionaries and engineers to create and develop their products, they also need someone with a growth mindset and business leadership skills.

• Increase endurance: Building a profitable startup is not easy. Perseverance and patience can be traits of all successful founders. In the beginning, it may be a slow growth journey, but eventually it will turn into a good and solid business. An invincible mindset will help you focus on achieving your goals.

Profitability is a deliberate choice.

Prioritizing profits first puts you in a strong position and allows you to focus on identifying and delivering what your customers value most. Capital no longer flows as freely as it used to, and investors now know exactly where to invest their capital. While early-stage investors may offer future prospects rather than profits, late-stage investors look for startups that can show a clear path to financial viability.

Pursuing profits does not mean sacrificing the potential for innovation or growth. Making a profit can create a more sustainable and stronger foundation for your startup. By focusing on creating real value, streamlining operations, and maintaining financial discipline, founders can create a new startup story that is acceptable to investors and customers.

The information provided here does not constitute investment, tax or financial advice. You should consult a licensed professional for advice regarding your specific condition.

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