Every great thing starts with a great idea. But a great idea doesn’t always lead to great success. In fact, 90% of startups fail. So, it’s important to acknowledge every step and process. Understanding the startup stages is the best way to know how you should plan your business. It’s because every stage has different requirements and milestones to fill. Knowing each of them can lead to success, from idea to launch, from maintaining to exit. Let’s discuss the startup stages through this article!
Pre-seed Stage
This is the fundamental of every startup. You basically want to go wild with your idea by testing, analyzing, and identifying every challenge. Ask questions out of it to address specific problems. This stage is an opportunity to fuel your idea which ends up becoming the foundation of your company. The end goal is to determine whether your product or service can effectively address a genuine market issue.
Some things you can do while in this stage are to:
- Get an external perspective: Seek feedback from potential customers.
- Look for investment: Start with close ones like friends or family.
- Prepare documents and legal issues: Sort out any necessary partnership agreements, copyrights, or other legalities ASAP.
Seed Stage
Now that you have laid the groundwork, it’s time to plant the seed. It is one of the most important stages of a startup. In this stage, you validate your entire business model by doing small experiments to test the initial value hypothesis. You might already have a minimum viable product (MVP) and everything should look more tangible from this point.
To succeed in the seed stage, you need to start connecting with the right people in terms of financing. It’s because capital starts to become very important in the seed stage. Look for potential investors like incubators, crowdfunding, and angel investors.
Early Stage
If you made it this far, then congrats! Only 7.5% of seed-stage startups advance to this stage according to VentureBeat. This stage is also known as “Series A”, defined as having achieved a first round of venture capital financing. That means your company has likely already seen some success. At this point, you have established its service or product, built an audience, and generated a consistent flow of income.
That way, you want to get a valuation for your business. The reason is that the total value of the company has leaped significantly during this stage. After that, you also would need a powerful pitch deck to attract investors to grow into the next startup stages. Not only a great idea, but a clear picture of your startup’s viability and potential for profitability is what investors want to see. The key to succeeding in the early stage is proving that your offer is likely to result in revenue in the long run.
Growth Stage
Passing the Series A? Now you’ve come to the Series B and C of business. At this point, high chance your business is going to make it. You can tell by looking at how the company has expanded beyond its potential and demonstrated the capacity to meet predicted goals while generating revenue. At this stage, the timing is key.
You want to scale your business while also knowing the right time. Not too quick that you burn resources faster than revenue comes in, but also not too slow that you fail to grow demands and meet deadlines. Scale your team to the next startup stages with the right people in the right place.
To expand your team also means spending money which means you need to secure more major investments. Larger venture capital firms, private equity firms, or even corporations are typically the investors at this stage. They seek out well-established businesses with a solid business plan and a high potential for substantial future returns. Also, prepare for the possibility of going public with an initial public offering (IPO).
Expansion Stage
This stage will conclude your business as a startup to become a scaleup as your company is well-established and profitable. At this stage, your company is well-known in the field, has loyal clients, a fully staffed workforce, and a track record of producing goods or services. In essence, every founder’s ambition is to see their company reach its late stages.
From this point onward, you might want to move on to Series D funding to increase the company’s value before going public. Or if you failed to gain the expected revenue after the Series C funding. But all and all, what is important in this expansion stage is to determine where the company goes next. You can consider if more growth is possible by introducing new products or services, entering new markets, doing acquisitions, etc.
Exit Stage
It’s the endgame in the stages of a startup. While it is not a mandatory, there are three possible scenarios in this stage: Sell shares. get acquired, or go public. Selling shares is good if you have valuable relationships in your industry. These connections can significantly impact the outcome of your exit. Meanwhile, going public will help raise more capital to fuel further growth. In the end, it’s critical to carefully evaluate both your startup’s current position and your personal goals.
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You may take references from many startups, but there is no set timelines for each stages. It’s okay to go slow or fast. Some may spend years just to pass Series A while others get bought early. There is no one-size-fits-all approach to growing a startup. However, knowing the various phases of a startup’s lifecycle can help you take advantage of opportunities to maximize your chances of success.
Looking to scale up your business? Let’s secure that investment with an impactful pitch deck! Check out our work to learn about us more.
