In addition to development vendors, which are necessary to help build the platform supporting your venture, you will likely also have to deal with tech-based transaction and infrastructure vendors that will be key in supporting your venture throughout its lifespan. For example, following the creation of your platform, you will need to partner with a hosting company (GoDaddy, for example) that can host and manage your site. Hosting companies are widely available and are relatively inexpensive. Other transaction vendors can prove more complicated. For example, back-end transaction processors, the firms that actually approve and process your merchant transactions, often come with their own set of problems.
PayPal is an example of a back-end transaction processor that can create headaches for any struggling venture. Be aware that PayPal can shutdown or suspend your service if they feel they need to review operations or feel there may be a risk involved in the merchant transactions. They can do this without warning. The same is true for many back end transaction processors. Its important to understand this factor as you become involved with certain vendors.
The best way to mitigate the risk related to back-end tech vendors is to find specialized, niche vendors that focus on your industry. These vendors may be more familiar with the risks, or general climate, of your industry, and be able to offer custom solutions to address these risks. Conversely, this factor can also work against you, where many tech vendors cannot – or choose not to – do business in your industry.
The risk related to back-end tech vendors is amplified if a venture finds itself reliant on a single provider. If you are reliant on a single processor to complete and review all of your merchant transactions, you can be held hostage to their policies and decisions.
Avoid This: Don’t blindly assume that large, established infrastructure companies will have policies that are beneficial to your business. In fact, they often have policies that are detrimental to your venture.