Startup Stages: From Idea to Maturity and Exit
Developing a startup is a challenging process. Due to statistics, more than 90% of newborn companies fail. But if you have chosen to join this path, it’s important to know its stages and have a clear understanding of which stage you currently are on.
What is a startup?
To talk about startup stages, we need to define the term ‘startup’ to make sure we are talking about the same thing. A startup is a small company (1–10 people) that is currently growing and offering a new service or product that is not currently provided on the market.
Note, that it’s not just a new company, its usually a fast-growing digital product/service, like Netflix or Airbnb.
Startup stages
Unites States is a leading country according to venture investments and there 3 main points of startup journey where defined:
- The idea validation defines if the idea of product or service is interesting to the market.
- Product Market Fit, where it’s determined if a product/service meets a market needs or not.
- Profitability and scalability testing to understand if the product can be massively distributed.
Idea + concept stage
During this stage, the founders think about the What they will provide, How they will do that, for Whom and Why. It’s also important to think about the revenue model because without revenue startup couldn’t survive. The team is small, usually few cofounders or even just one person.
Moreover, the clear plan has to be defined in terms of 3, 5, 12, 24, 36 months.
Seed And MVP
After there are an idea and a plan, it’s time to build MVP(Minimum Valuable Product). It’s a simple version of your product, the key feature that people would love.
It’s highly unlikely that your idea is what your customers would like, that’s why during this stage, it’s essential to learn what users or clients want and then satisfy there desires.
MVP can be a prototype of your website or application, a video, or a website describing it. You just need to understand what people think about your idea. But keep in mind this:
To create an MVP, you can use these tools.
— > Read our article about how to build MVP
From MVP to Product-Market Fit (PMF)
In this stage, MVP is developed until it becomes a solid product that fits the market with the help of the lean startup approach. In other words, your product should be in a good market and satisfy its needs or desires. This stage can take several years.
Ideally, during this stage, the company generates revenue and business model can be tested and redefined.
From PMF to Scaleup
On the way to scaleup, the company has to prove that the product can be distributed at a large scale and generate cash flow.
With the help of the “unit economics” of the business model, real numbers can be clearly visible. These numbers will impact a company’s economic valuation and will show if the company can generate a solid revenue.
Most of the startups are looking for investments. The first investments can be found in the stage of idea, but serious money is at the scale stage. That’s why you have to prove that the business model of your company is profitable. Venture capitals look for strong growth rates in a very short amount of time.
If a startup hasn’t measured unit economics, it means the company is not ready to scale and move to a stage of rapid growth. It would be a big mistake to grow a startup that hasn’t achieved this milestone. Just imagine investing $30MM+ in a startup that isn’t profitable.
Growth And Establishment
In this stage, the company generates revenue and is growing by reinvesting the money into conquering the market. There is no doubt that the business model is profitable and the company can keep growing.
It’s a business, not a startup anymore. Staff is working on the tasks, there are departments and managers. It’s a stage of some sort of stability and routine. Most of the CEOs have a desire to keep growing, expand the product line and features, go to new markets. And it’s okay when done right, that’s why serious planning is crucial.
Look at the resources you currently have, calculate the costs of the expansion and measure the possible risk. Also, keep an eye on how new changes will impact current features and customers.
Remember, a lot of companies have died because of careless growth, so analyze thoroughly.
Maturity and Exit
When the company is generating revenue year after year, there is a choice the entrepreneurs face: continue to expand or sell the company and exit.
If you decide to go further, you should ask yourself the same questions as in the previous stage:
- Can the company maintain further growth?
- Is an expansion worth it?
- Could your business hold an unsuccessful expansion and money loss?
The choice of selling the company is quite popular and it’s another interesting journey. Before it, you should prepare all the numbers and documents and evaluate your business.
Table-view summary of startup stages
If your startup needs technical or design help, we at Elligense have dedicated professional that love building new, innovative projects. Send us a message to find ways of collaboration!
