I believe one of the hardest thing for start-ups is to keep their sxxt together as they grow. Did I ever create a start-up? No. Do I have the authority to talk about it? Probably not. But I am damn curious. I read, I talk with people, I form my opinion. So, if you are start-upper, or an entrepreneur, and you agree (or disagree) with what I am saying in this article, please let me know in the comments section below. Constructive feedback is always appreciated.

The five stages (and phases) of a start-up

And the start-up experience customer journey

Disclaimer: please note this article is a collection of personal thoughts, data points and a few quotes from experts. All info is publicly available. The content hereby written does not reflect in any way the position of the company I work for. Also, part of the content is inspired by an article I found on entrepreneur.com (see [1]).

Dear reader,

According to the recent Start-up Genome Report, an estimated 90% of start-ups that fail do so primarily due to self-destruction. It was their founders’ own bad choices or lack of preparedness rather than so-called “bad luck” or market conditions that were out of their control. Interesting.

Every business will face some unique challenges as it grows. But there are certain roadblocks in start-up life that are common among entrepreneurs.

Here follows an explanation of the development stages of a start-up and a description of a recurring problem (for the start-up). Up to you to think about a potential solution (the company providing the solution could be as example a manufacturer, or a retailer).


STAGE 1: SEED AND DEVELOPMENT

At this stage, start-ups garner advice and opinion as to the potential of their business idea from as many sources as possible: friends, family, colleagues, business associates, or any industry specialists you may have access to.

IDEATION PHASE

1. The founder has a business idea, which usually starts from a personal need or a deep understanding of the industry he already plays in

2. The founder seeks for a co-founder which usually has complimentary skills and share the same vision. They establish roles and responsibilities (as example, a co-founder in charge of shareholder and investor management, 3rd party agreements another focused on developing the product, or the technology)

3. The co-founders craft out a series of assumptions and go out and test them with real consumers

Start-up challenge/problem. Start-ups need to develop their story. Each start-up you work with should have a true purpose and a clear vision, and of course a real problem to solve. Usually start-ups don’t like interferences from external parties at all stages, but they surely appreciate free advice. They feel they are on the lonely path at this stage, which means friends really don’t understand what they are doing and likely are not ready to become co-founders, but also from the business side solo entrepreneurs don’t have any kind of support. Solo entrepreneurs really need to socialize, that is why often they join communities where they can get feedback from other startuppers (a social circle of entrepreneurs). Finally, start-ups also need to keep the end user always on top of mind.

Ask yourself. Which role could potentially my company have at this stage? How to make it happen?


STAGE 2: START-UP CREATION — EARLY GROWTH

Once the start-up has thoroughly canvassed and tested the business idea and it’s satisfied that it is ready to go, it’s time to make it official and launch it. Many believe this is the riskiest stage of the entire lifecycle. In fact, it is believed that mistakes made at this stage impact the company years down the line, and are the primary reason why 25% of start-ups do not reach their fifth birthday.

SELLING THE VISION and PROBLEM SOLUTION FIT PHASE

4. Once interest is proven, the co-founders seeks for a few additional team members to create a minimum viable product (MVP); they also seek for potential partner willing to help them create an MVP where capabilities are missing (e.g. distribution)

5. In parallel, co-founders seek for initial funding for the creation of the MVP

MVP PHASE

6. The MVP is created and released into the market and all assumptions are tested. The model is pivoted in case assumptions prove to be wrong

Start-up challenge/problem. Start-ups cannot wait for perfection. When starting a new business, there is only so much you can predict with the information you have. The only way to really know if something is going to work is by testing it in a quick and sloppy way.

Ask yourself. Which role could potentially my company have at this stage? How to make it happen?

LAUNCH PHASE[2]

  • Kind of in between MVP and generating strong income, there is the official launch of the supposed final product. Prior to this stage, it is important for start-ups to have secured leads. A way to obtain this, at MVP stage, is to build the hype (e.g. “Sign up here to be the first ones to know about it”) and have a hard launch date
  • Planning and alignment is key here but very difficult to achieve, due to the chaotic and unstructured environment typical of an early stage start-up. The different marketing channels should all operate in synergy, rather than independently. The advantage of an aligned launch across channels is to add some legitimacy to young and new start up new business and that’s one benefit sometimes overlooked by them

Start-up challenge/problem. Choosing the right design. Start-ups struggle to find a good agency or designer to work with. They also need to test and validate design ideas.

Ask yourself. Which role could potentially my company have at this stage? How to make it happen?


STAGE 3: LATE GROWTH AND ESTABLISHMENT

At this stage, the business is generating a consistent source of income and regularly taking on new customers. Cash flow should start to improve as recurring revenues help to cover ongoing expenses, and the start-up looks forward to seeing profits improving slowly and steadily.

The biggest challenge for entrepreneurs in this stage is dividing time between a whole new range of demands requiring attention – managing increasing levels of revenue, attending to customers, dealing with the competition, accommodating an expanding workforce, etc.

SEEDING and PRODUCT MARKET FIT PHASE

7. Once MVP is proven, the co-founders seek for more money to fuel the business and improve

8. Also, hiring smart people with complementary skillsets is necessary to make the most of the company’s potential during this phase, and so any good founder is spending a lot of time directly involved in the recruitment process

9. In parallel, the start-up develops a marketing and communication strategy to promote the business; the co-founders seek for innovative, creative and cheap ways to engage with potential partners to improve the offering, and with influencers and media to get the right attention

Start-up challenge/problem. Start-ups don’t need people getting in their way. What they need at this stage is money and resources to attract more users. A specific example is the struggle to win the hearts of the influencers (many start-ups find PR outreach not successful).

Ask yourself. Which role could potentially my company have at this stage? How to make it happen?


STAGE 4: EXPANSION

At this stage, staff is in place to handle the areas that co-founders no longer have the time to manage (nor should be managing), and the business has now firmly established its presence within the industry. Here the start-up enters the late-growth stage and might start to think about capitalizing on this certain level of stability by broadening your horizons with expanded offerings and entry into new geographies.

SCALING PHASE — LATE GROWTH START-UP

10. The company is formed, the product is being sold with success. The team cannot keep up with demand. Through right partnerships, influencers and word of mouth, everyone is talking about the growth and success of the start-up. Now the team focuses on scaling the business (geo expansion, portfolio increase, new RTM…)

Start-up challenge/problem. Start-ups at this stage need to surround themselves with a group of people with diverse viewpoints and experiences; they also need access to a network of distributors for geo expansion.

Ask yourself. Which role could potentially my company have at this stage? How to make it happen?


STAGE 5: MATURITY AND POSSIBLE EXIT

Having navigated the expansion stage of the business lifecycle successfully, the company is now seeing stable profits year-on-year.

At this stage, entrepreneurs here are faced with two choices: push for further expansion, or exit the business. If they decide to expand further, they will need to ask themselves the same questions they did at the expansion stage: can the business sustain further growth? Are there enough opportunities out there for expansion? Is the business financially stable enough to cover an unsuccessful attempt at expansion?

And, perhaps most importantly, are the founders the type of leaders who are up for the task of further expansion at this stage? In fact, many companies change leadership here, bringing in a seasoned CEO who is more fit to navigate the new challenges.

Many start-ups at this stage also look to move on through a sale. This could be a partial or full sale, and of course depending on the company type (for example, public or private), the negotiation may be a whole new journey in itself.

Start-up challenge/problem. Start-ups at this stage need to take a step back once in a while as the emotional journey of building a company is almost impossible to anticipate. Founders care so much about the thing they started, so everything is amplified.

Ask yourself. Which role could potentially my company have at this stage? How to make it happen?


Conclusion

Barriers to entry are lower than ever. Anyone can create a start-up from scratch in no time. You don’t even need a product to start!

The problem is: it is a damn hard job. And you are not the only one playing the game. Whether you are a start-upper, an entrepreneur, a founder or even a company potentially looking to find ways to collaborate and partner with start-ups, you have a lot to think. A mistake in preparation could be fatal. Sloppy execution could have the same results. Stop believing in your product/company/team, and you are surely doomed. So, next time you think you could make money easily becoming an entrepreneur, or thinking you know it all, think again. Because for true start-ups, the ones with a purpose, it is never about the money (well, not only, money helps!). And they surely know they do not know anything, as they discover things through their journeys.


That’s all folks! What do you think about these insights? I am looking forward to hear your opinions in the comment section.


References:

[1] Partly inspired by https://www.entrepreneur.com/article/271290 (the content in Italic is taken from the linked article).

[2] This section has been inspired by an extremely interesting article on the challenge a food snacks start-up was facing when launching their product. More at shopify.com/blog/digital-nomad-greenbelly-meals.