Startup Technical Debt: The 7 Killers of Sustainable Growth

After a few years of relentless work and late nights, you've established a customer base and expanded your team. You've either achieved financial viability or secured initial funding, and now it’s time to capitalize on opportunities and eliminate waste.

As a founder, one of the first things you should assess are your software systems. While off-the-shelf software solutions can be useful in the early stages of a startup, they can quickly become a bottleneck as the company grows. Although they helped you get to this point, they will probably hold you back from moving forward.

Suppose you were to consult a financial advisor and ask how to invest a windfall inheritance; the advice would probably be to pay off your 24% interest credit cards before investing in a 10% growth mutual bond. For startups, let’s compare this inheritance to your revenue or funding, and the credit cards to shortcuts you’ve taken with your technical landscape to get your business off the ground.

Now is the time to get your technical finances back in order. Here are seven technical “credit cards” to pay down before investing in sales or marketing.

1) Downtime

Address any downtime in your software system immediately, whether it occurs occasionally or more frequently. Downtime is a significant setback that can lead to lost revenue and impaired productivity.

For example, one company that came to The Smyth Group was using an old, unsupported ERP system that was constantly breaking down. When it went down, the company would inevitably send half its staff home for the day. Eventually the system broke down for two weeks—to the tune of a few million dollars.

Worse than that, if your system is used by your customers, unreliable system performance can severely damage customer trust and credibility.

You can significantly mitigate these problems by consulting with a senior engineer, even for just a couple of weeks, to identify and correct system issues that are causing costly downtime.

2) Integration Challenges

Early-stage startups often assemble a patchwork of software systems—a Frankenstein software model—to meet their various business needs. Growth-stage startups, in particular, can find themselves struggling to manage this complex ecosystem, leading to duplicated effort, manual workarounds, and a hindered ability to scale. The lack of integration among these disparate software systems often necessitates duplicated or manual effort to maintain operations. Your “solution” has turned into a monster that you’re trying to keep alive, but it’s also killing you. The more your business gains traction, the more those integrations crumble.

Investing in software systems that will bridge gaps and replace multiple systems with a single solution is key to paying off this technical debt.

3) Security Vulnerabilities

Cyberattacks and data breaches can have serious consequences for a startup’s reputation and finances. One company that came to TSG had been cyber-ransomed for $100K. The hackers said they would return the data, and they did…in a completely broken and unusable format. Worse yet, these breaches often result in lawsuits.

Sometimes founders are unaware that these vulnerabilities even exist because they are simply trusting their developer(s) to take care of everything. Bringing in a senior engineer to do an audit will greatly strengthen your security. Here are some potential problem areas:

Authentication

When a user (perhaps one of your customers) logs into your system, that user has a role that is designed to provide them access to only the information they are allowed to see. However, if security measures are solely implemented at the login interface, a malicious user could circumvent them and gain unauthorized access to sensitive data and run their own program that would probe to see data from your other customers. This vulnerability could be exploited if security measures are not implemented effectively.

Input Validation

If a customer or employee possesses even rudimentary SQL knowledge and enters a malicious line of code into one of your forms, they could potentially erase your entire database. This type of cyberattack, known as “SQL injection,” must be closely monitored by your developer to ensure that none of your forms are susceptible to such exploitation.

Encryption

Your data is likely encrypted when it is at rest in a cloud database, but is it encrypted while in transit to your web screen and mobile apps? Sometimes attackers can “sniff,” or steal, your data while in transit. If this sounds a lot like 2003’s The Italian Job, that’s because it is, but with slightly fewer explosions.

Third Party Integrations

Your system may be fairly secure on its own, but what about connections to third-party integrations? Perhaps you have billing information going straight into Quickbooks, or you integrate with Square to process payments. If the connection between your software system and the third party is not secure, an attacker could intercept and steal payment data, such as credit card numbers and billing addresses.

4) Poor User Experience

Because your software system isn’t custom-fitted to your business, it isn’t custom-fitted to your customer. The lack of customization in your software solution results in a suboptimal customer experience, forcing customers to endure inefficiencies and frustrations.

You can manage a poor user experience when you only have a handful of customers (via personal attention/service) but if you are onboarding hundreds of customers, you won’t be able to continue compensating for the poor experience. As competition for that customer inevitably increases, it will get harder to retain them. You may never know just how dissatisfied your customers are until they leave for someone else.

Furthermore, the more customers you are trying to attract, the more demand there will be on additional services and features that an off-the-shelf solution probably can’t handle. At some point, you will have to invest in optimizing the experience for those who are sustaining your business.

5) Lack of Scalability—You Can’t Deploy New Features Fast Enough

During a growth stage, software systems will start to scale and get larger. Features will keep growing and propagating. Systems will also have been in operation for a longer period of time than they were in the early days, with more changes under the hood and mounting entropy. As this takes place, everything will get slower and harder for growth-stage startups.

Founders are often frustrated with the speed of building and deploying new features. A non-technical founder will often struggle with understanding why it used to be so fast, but now it’s so slow and painful.

Typically, this is because the development team has been testing and deploying the software system manually, rather than building automated tests and automatically deploying the build on a pipeline. Bringing in senior engineers to implement test automation will greatly speed up deployment.

6) Inefficient Processes and Operational Inefficiencies

If you built your operations and processes around your software, instead of the other way around, you have technical debt. Creating processes that compensate for areas where the software lacks efficiency is normal in the early days of a startup, but it’s an enormous waste of time and resources in the long run.

Processes and systems that are not intuitive will cause internal frustration and steep learning curves for your employees. Onboarding will be challenging as people learn the processes involved in working with a software system that isn’t custom-fitted to your business.

As time passes, operational debt accumulates. Investing in purpose-built, intuitive systems can reduce this debt, leading to operational cost savings, decreased soft costs, and improved employee satisfaction and retention.

Your business should drive the development of your software rather than your software determining your business processes.

7) Lack of Data Insights

A lack of data insights from your business’s software systems themselves may not hold your business back, but having these insights—and acting on them— can bring enormous value.

For example, information about your customers and what you have sold can drive business decisions and help you hit milestones. Senior engineers can leverage tools like Tableau, Power BI, or other custom AI tools to analyze vast amounts of customer data and identify patterns that drive business decisions and help you achieve milestones.

The earlier you act on big data, the sooner you can maximize your startup’s potential.

Clearing Your Software’s Technical Debt: The Foundation for Sustainable Growth

By addressing these seven technical "credit cards," you can lay a solid foundation for your startup's continued growth and success. Look for experienced engineers who can help you identify, prioritize, and resolve technical issues that are hindering your progress. This will clear the path for sustainable growth and allow you to achieve your business goals.

Remember, the earlier you tackle technical debt, the easier it will be to manage and the more benefits you will reap in the long run.