Good High Technology Companies Are Easy To Spot

The dot com era craze seems to have faded off from the spotlight in the last 8 years. Since the bubble burst, it seems like it is no longer the darlings of media and instead have been seen as a deathtrap to investors, unless of course, it’s a Google or Microsoft. Although it’s no longer trendy to be associated with high tech start up companies, many new ones are starting up all the time.

Not only are high technology company investors and venture capitalists looking for the next google, so are young, sharp professionals who want to take some risks early in there careers for a chance at being part of the next big $500/share stock. If you’re looking for a high technology investment for your money, time or skills, here are a few things to look out for that might get lost in the glamor and jazz.

Cash is king. The point of a business is to make money. And not just revenue, but we’re looking for positive cash flow. A cash flow that is positive and that is growing is what brings value to a high technology company. High tech start up companies that are sitting on a pile of investment capital and loans and are not generating cash have yet to prove themselves. Money talks and even in business, that can get lost in the glare of future earnings that may or may not come to pass. No business was ever started where the founders expected to fail. And every high technology company views themselves as revolutionary in their industry and as leading innovators that will change the face of the market. So watch out. The idea for the high tech start up company sounded good to someone at some point, so look past the “it should work” to the “it does work according to the numbers.”

The average profit margin for a software company is –3%. Why? Because the industry is a mix of very highly successful high tech start up companies like Microsoft and Google, with thousands of high technology companies that have yet to generate any revenue. So why do people enter the market when the overall profit is so low? Because no one enters the market thinking they’ll be the ones making negative profits. They all enter thinking they’ll be the Microsoft's and Google's.

A high tech start up is called a start up because it’s in the beginning stages where immediate profits are not expected. So what is the criteria to look at for know you’re in a good startup? Here are a few good rules of thumb:

High tech start up companies generally can take 3-5 years to development a product or service for market. So let’s call that the grace period. During that time, you have no clue. You’re going on faith alone and the product is only a dream.

After the product goes to market, are you seeing revenue? It may take a few years to get cash-flow positive, but if you don’t seen any revenues relatively soon after it goes out to market, I would begin to question if it’s going to work.

If the high tech start up company is still relatively young AND making positive cash, go all in, it’s a good company. But along the way, make sure they are staying focused on what they do best. Often times, small companies will begin to diversify their portfolio of products and services too soon, before they have the capital and resources to manage them properly. It will also cause them to divide their manager's time and attention from the real money-makers.

You can comb through the Inc 500 list to find good high tech start up companies. Inc does a good job at researching growing companies. Again, it's important for you to find companies that are growing. Size doesn't matter when it comes to finding good opportunities, it's all about growth.

If you are looking into getting into sales, high tech start up companies create a great opportunity to quick-start a great sales or executive career. Before you decide to apply, make sure they have the qualities discussed above. If they don't, you might not have a job in a year because they might not stay in business. And, if you're in sales, and the business is not making money, neither will you. If a high tech start up has a history of creating revenue, you have a higher chance of making a lot of sales = a lot of money.

Because they are start up companies, they won't care about your history, resume or lack of experience. If you can deliver, they'll keep you around. So if you have some merit as a salesperson, a high tech start up company is a great environment to shine and not be hindered by your lack of experience or paper qualifications. All men a created equal when it comes to doing sales for a high tech start up.

Even if you don't want a career in sales, it might open a door to a management or executive career. Many successful CEO's and executives started out in sales. Many CEO's of banks started out as loan officers, which is a sale position. If you're bringing in money for the company, not only will you make money, you will also have great exposure to many people who might help you along the way in your career, no matter what you want to do.  Working for a high tech start up company is a great way to start a career in business.

I started a blog talking about my experience working with high tech start ups. I've done sales, business development, marketing, project management and general management for high tech start up companies. High Tech Start Up Sales Blog.

Growing high tech start up companies are good to form business relationships as well for several reasons.

#1) They are increasingly in need of products and services. Large companies already have most of their vendor relationships under contract and have formed strong relationships over the years. It takes a lot of convincing to get a large company account. People by nature don't like change and since companies are run by people, companies don't like to change either, unless they are having significant problems. Once a vendor is in, it's hard to get them out.

With smaller, growing high tech start up companies, they are young and don't have solid vendor relationships. In addition, they tend to be more innovative and more open-minded. They are generally in search mode trying to find the best services, products and vendors to help as they grow and build their business. There are huge opportunities to do business with high tech start up companies because of their relative age.

Also, high tech start up companies are generally bootstrapping any and everything, so if you can demonstrate effectively that your company or business will save them money or help them make more money cost-effectively, they will be very open to you.

#2) High tech start up companies constantly have a need for new products and services as they grow. An accounting system or human resources system at the beginning in a 3 man operation will be different when there is 10 employees, will change again when they have 25 employees and will change again when they have 100 employees. I started working with a high tech start up when they had 20 employees. They grew to 100 employees within a year and a half and at almost every dozen or so employees, they were in need of quickly, and cost-effectively upgrading their systems.

#3) High tech start up companies make quick decisions. They aren't old enough or big enough to have endless rounds of committees, multiple decision-makers and evaluations. They generally have only one decision-maker, and will decide quickly if it makes sense to them. Larger companies have to go through sending in long applications and proposals that take hundreds of hours to prepare and you end up competing with large multi-national corporations. High tech start up companies can make a decision in a day with little paperwork. It'll save you tons of time in your sales process.