Question

In a live, web-based simulation, you'll play the role of a founder of a new start-up company in the exciting and competitive clean tech sector. As part of the simulation, you'll set prices, determine how many engineers and sales people to hire, and establish set compensation, including salary, stock, options, and profit sharing. As part of your experience, you'll explore how you can build your technology into a successful company. You may choose to pitch your firm to venture capitalists or to bootstrap and remain 100% employee owned. You may win customers and become cash flow positive before you run out of funds. You succeed and take your firm public. There are many opportunities as the founder of the company. There are many opportunities to explore in this project! The purpose of this activity is to explore the challenges of a start-up company in a demanding, competitive environment, including financial, human resource, strategic, and other decisions.

Answer 1

The major challenges faced by start-ups are -

• Competition: There is immense competition in the world today, because information is available freely and openly to everyone. Both business-to-business and business-to-customer start-ups face competition from the companies that are already existing in the market, and this makes it extremely difficult to have any margin for error in the functioning. Hence, it is very important that a start-up is driven by passion for the idea, and is backed by rigorous research about the field.
• Hiring the workforce: In this day and age, there is a pool of very talented and targetted group of young minds who are available for hire. This is one of the most potent challenges faced by start-ups, because most of them start small, with minimal workforce, and this makes it even more important to have the synergy right among the workers. HIgh qualified and experienced candidates will not choose to work for start-ups and if they have to be hired, they have to be paid more. That usually leaves freshers and young graduates, who have to be trained in the job they are being hired for. Thus, organizing the best workforce is the next step.
• Decision making: For start-ups, it is difficult to manage everything, as more often than not it is the same person, or group of persons, who are to make most of the decisions. Desisions regarding whether to go public or stay private, or be employee owned, etc., will present themselves and have to be assessed properly. Without enough financial backing, it is always advisable to pitch to venture capitalists, angel investors who have had the experience and the knack of investing in new projects. This will ensure a proper source for the funding and the owners can then focus on other areas. Going public at the first stage itself might not be advisable, unless the owner has some public image to back the equity price.
• Security: In this day and age, it is very easy for third parties to breach the security and get their hands on start-up information like sensitive technology and R&D information, employee records, etc. Hence, proper security with special emphasis on cyber security is important. Care should also be taken on who to hire, as it is easy for personnel breach to take place from competitive firms. Proper documentation and adequate details should be emphasised upon, and sensitive information should remain within close quarters.
• Customer satisfaction: This is the determining factor of a start-up's success. It is important for the business to focus on getting more and more customers, and hence they should focus on customer satisfaction as their most important metric. It is important to focus on reaching out to more and more prospective customers through targetted marketting and broaden the customer segment served by the business.