Startups can enjoy the benefits of Staff Augmentation to minimize the risk of failure

Startups are a crucial part of the US economy. As of 2024, roughly one million new businesses were starting up. It is estimated that startups employ about five million people, which is 5% of the private sector workforce. To support these new startups, venture capital investment is likely to be around $264 billion!

Sadly, statistics suggest that 20% of these startups will fail within the first year. Other stats indicate a failure rate of up to 70% in the first five years. Given the amount of investment and the hard work put in by the startup team, why do so many fail? And how can you avoid it?

Reasons for failure

Each startup is different. Their business model and managers' experiences and expectations are different. Much has been written about startup failures, and, to a great extent, no two articles on the subject will show you the same reasons or statistics. This can be confusing. 

The story becomes even more confusing when the diversity of markets is added. So, we'll focus on tech startups and the reasons they fail.

There are, however, some common reasons that appear in every study. These are, in descending order of importance (but recognizing that even this is subject to debate!):

1.        Lack of money

This is the most common reason for startup failure. It may be due to insufficient investment at the outset or improper business plan execution.

Whatever the reason, running out of money is usually the most significant reason given for startup failures.

Unless you have great experience in writing business plans, let someone else do it for you or at least check what you've written. Too often, an entrepreneur has an overly optimistic view of returns. Combined with the inevitable hidden costs, this can only lead to disaster.  

2.         Bad market fit

Some studies have cited poor market fit as the cause of up to 42% of startup failures. This has led to the downfall of many budding entrepreneurs!

The reasons for this can vary. An entrepreneur may think he has a great idea and dive into production without any market research, only to find that no one wants his great idea. 

Or it was a great idea, but the timing was wrong. The launch may have been too early or too late—they may have been beaten to market by someone who saw the gap in the market and moved faster.

Before committing to any 'great idea', it is imperative to conduct thorough market research—and that's more than checking with friends and colleagues!

3.         IT Team or HR issues

The same study that said 42% of startups fail due to poor market fit also noted that 25% fail because they don't have the right people.

Steve Jobs is quoted as saying, "Great things in business are never done by one person; they're done by a team of people."  Finding the right team can be a challenge.

This can be especially true when it comes to IT.

If you are developing an app, it is critical that you plan ahead to ensure you have access to the right skills. One problem facing startups is that the specialized IT skills they need can be hard to find, and those skills may only be required for a part of the project. 

What can you do? Delay the project until you find that skill? Or hire the person quickly only to have to let them go later when their unique skillset is no longer needed and cash it tight?

This is where staff augmentation can be beneficial. You can access a range of skilled developers, using the right skills as you need them and switch them as you need other skills. See below for more reasons why startups can benefit from staff augmentation.

4.         Poor or misdirected marketing

Statistics indicate that 22% of startups fail not because of poor market fit but due to poor or misdirected marketing. After all, even with the best product in the world, if no one knows it exists, it won't sell.

Marketing isn't just about shouting about a new product to everyone. It's about ensuring the right people in the right locations learn the right things about the product—and at the right time. Many excellent products have failed because they were too ahead of their time.

Read about 26 startups that failed due to bad timing.

Marketing involves more than bringing awareness to potential buyers. It also involves understanding what they might be prepared to pay. Too often, insufficient market research leads to a wonderful idea that is beyond the reach of those who might use it.

Read about 10 products that failed due to poor marketing

And, of course, there are the marketing bombs of all time to read about here, including those by Pepsi, Starbucks and others who should have known better. They may not be startups, but if they can make fundamentally stupid mistakes, there must be lessons for us all!

The lesson is clear. Make sure your marketing and sales plan is thoroughly researched.

How to address Item 3 – IT Team Issues

Although you may be convinced that your idea is the next Waze or Facebook replacement, you'll probably just have many lines of code unless you have the right IT skills to support your development.

But how do you convince IT specialists, who are invariably already highly paid in their current jobs, to risk everything and join you without paying them a silly salary? Your friend may be an awesome Python coder, but is that enough?

Once you've got your investor capital, you will need to show results—and soon. An MVP (minimum viable product) is likely to be expected as proof of concept. But aside from attracting the right skills, there is the timing to consider. Studies show that, depending on the skills needed, the recruitment time for top IT skills can be as long as 35 days. That can be a long time in a new product's lifecycle.

Staff Augmentation is the answer

As previously mentioned, staff augmentation is the ideal route for startups. At the earliest stage of your project or when the time is right, you can access a team of IT specialists with the necessary skills. And at a fraction of the cost of employing staff. You can choose the staff you are comfortable with and switch the skill sets as needed to minimize costs.

When your priorities should be focused on marketing, finances and the product launch, staff augmentation will remove the worries of staff benefits, staffing space, and other unnecessary staff-related concerns. 

Once the project is at the right point, you can recruit staff from the market. You can bring them on board as needed instead of having them on the sidelines 'just in case' and at full salary!

Which type of Staff Augmentation is right for your Startup?

Staff augmentation comes in three forms – local, offshoring, and nearshoring.

Local staff augmentation services will be located near you. You will have the advantage of quick access to a range of skills. On the other hand, the staff rates will inevitably be costly as the US staff rates are at an all-time high. 

Offshoring is typically offered as a cheap alternative. The staff likely will be based in India, Africa or the Philippines. The hourly rates quoted often are low. However, when one considers the 8 to 12 hour time difference and possible language issues, the value (as opposed to cost) is diminished. 

With the pressures of a launch deadline, can you risk delays caused by the time difference?

Nearshoring is provided by staff in the same time zone as you but outside the US. Mexico is proving to be a popular nearshore center. Mexico universities produce highly skilled IT developers proficient in all new technologies. Staff costs are significantly lower than their equivalents in the US, but without losing quality. And they speak excellent English.

Learn more about the benefits of Nearshore Staff Augmentation here.

Global Triangles – Staff Augmentation Specialist helping Startups!

Operating since 2015, Global Triangles is a US-based company that offers IT nearshore staff augmentation and outsourcing to clients across North America. We provide solutions that enable our clients to achieve their goals at affordable prices. We pride ourselves on generating agreements that work for our clients and teams. 

At Global Triangles, we utilize a strong team of English-speaking Mexican IT developers, each carefully chosen for their work ethic and professionalism. Our developers can work on multiple technologies and platforms like web, mobile, cloud, AI, and blockchain. 

We've helped startups with MVP development and sourcing skilled staff at short notice. Check out this case study, Empowering Startups with Aguagente, at this link: https://www.globaltriangles.com/success-stories 

We have the expertise and the flexibility to help startups achieve their goals and entrepreneurs their dreams! Contact us to learn how we can help you.