Life cycle of a digital tech business: how to take your start-up to corporate success?
The author Peter Adediran is a UK qualified and fully licensed current practising solicitor specialising in mobile applications and ecommerce related B2B and B2B2C start-ups and later stage SME growth. His areas of expertise include using intellectual property to add to business value, and drafting growth and exit focused commercial agreements. His breadth of experience over 18 years includes more than a 100 start-ups worth over $100 million.
INTRODUCTION
Like the lifecycle of a star which progresses through a series of differing stages of development, the life cycle of a digital technology start-up must pass through a series of stages from its inception through to corporate success.
“What a start-up means is a business that has identified an entirely new service or product, or discovered a better way of providing an existing service or product.”
INCEPTION
The first stage is coming up with the idea.
What is a digital tech start-up?
A digital technology business is any business that primarily relies on digital technology, whether as an application, platform, service, product, hardware, software as the primary source of its revenue.
Even if the business is ostensibly a taxi business, if it heavily relies on digital technology, it’s a digital technology business. So, Uber is a digital technology business, not a taxi business as such, because it relies on a peer-to-peer decentralized platform whereby people who want taxis can book direct with taxi drivers, without the use of a company or taxi cab business acting as intermediary.
What a start-up means is a business that has identified an entirely new service or product, or discovered a better way of providing an existing service or product.
It does not necessarily have to have identified a market or have a source of revenue. It can discover those elements during its lifecycle. However, innovation and ingenuity of the idea is crucial to being a bona fide start-up.
Once you have the potential winning idea that will change the world, the next step is to survey the market to see if your idea is viable.
PEER VALIDATION
The second stage is taking advantage of the excellent digital technology ecosystem in London to find affirmation and support for your ideas.
If you do not have any of your own money to invest in your idea, then you can get funding and advice from Accelerators like DotForge; and Seedcamp, to name a few. Accelerators provide seed funding in return for an equity stake, and access to an excellent network to get you started. According to Tech Nation, tech investment in the UK in 2016 alone was £6.8 bn. There is also government support for funding. Additionally, you have Angel investors like London Business Angels; Crowdfunding services like Crowdcube and SEEDRS; and venture capitalists like Index Ventures and Passion Capital.
If you have your own money to invest in your idea, then it’s a good idea to approach digital technology consultancies dedicated to adding value to your start-up through strategic advice for a fee. You should also take advantage of the numerous digital technology networks and digital technology start-up events and meet ups in London
COMPETENCE
The third stage is the efficiency stage. To do well at this stage you will need the voice of experience. You will need accounting, legal/IP advice, banking and digital information technology services. All these things are related.
“…if you have not built your website and mobile app on industry compliant code there is little point in having compliant data security and protection policies. The same is true for choosing the mobile or web hosting server provider, or web data services processor.”
So, for example, if you have not built your website and mobile app on industry compliant code there is little point in having compliant data security and protection policies. The same is true for choosing the mobile or web hosting server provider, or web data services processor, they need to offer reliable scalable web computing services.
You need to find specialist professionals in digital technology to maximise the efficiency of your start-up as it will be of the utmost importance at the final stage of corporate success. Not doing so could mean running into problems, once you start to have large customer demand, which could be the end of your start-up before it really gets going.
SCALABILITY
This is of fundamental importance in the start-up life cycle. The ability of the business to grow. In the borderless Internet, you need to embrace cross-border trading whilst keeping your costs down. The ability of a start-up to trade across borders can mean the difference between success and failure. The technology on which your idea is built will be very important here, as well as the effectiveness of your legal and intellectual property registration, advice and strategy. At this later stage in your start-up’s life cycle, there are incubators like Edinburgh’s Codebase; and Momentum London, that can assist your start-up in further growth. Incubators generally do not take a stake and they are long term advisers of the business. It generally takes about 6 to 7 years of trading to be at this stage.
MARKET VALIDATION
This is the stage where the market is singing your praises. You have entered, and won several tech competitions and events. There is a buzz around your start-up. You have won TechCrunch Disrupt or have been featured in the Webby Awards. Congratulations you have a sustainable business even if you have not yet made a profit. Only 10% of all venture capitalist funded start-ups ever make it to this stage. The tech industry sees your start-up as a great business. Did you know that Spotify; Drobox and TransferWise have never made a profit?
CORPORATE SUCCESS
You have made it. You are about to take advantage of your exit strategy, if you ever had one. You do this through an IPO (Initial Public Offering) a merger or an acquisition of your shares. The next stage is that you either spend the rest of your life relaxing on a beach in Saint Tropez, or you reinvest your windfall back into the digital tech ecosystem. Did you know that many of the digital tech giants today were created by windfall money that came from past successes? Elon Musk (best known for PayPal) reinvested his windfall from Zip2 to fund X.com which he sold to co-found X.com, X.com merged with Confinity that owned PayPal.
We can add value to the steep growth curve of your digital technology start-up. Contact us for legal and intellectual property advice by email to support@pailsolicitors.co.uk.