Blog

Stages of startup: In this article, we will talk about the various phases of a startup for a new founder/entrepreneur. The life of an entrepreneur is very exciting at the early stages where you’re trying to get your idea off the ground. The purpose of this article is to provide you context about the various stages that you might influence your funding or growth strategy.

To get the best value from this article, I’d strongly recommend pre-reading the difference between startup and a small business. A small business differs in its purpose and outcome, whereas with a startup, you’re most likely to follow the funding processes at various stages. We will go into the detail of funding stages in a separate discussion.

The 5 stages of startup are

1. Pre-seed stage
2. Seed stage startup
3. Early stage startup
4. Growth stage
5. Exit stage

Depending on the type of startup, you might be able to skip a few steps. But the simplest form of stages of startup includes – idea, development and growth. You might decide to exit or not depending on the type of your startup, your purpose and mission. Also read through types of entrepreneurship/startup to find a context and influence funding, growth or selling stages of your business idea.

Pre-seed stage

This is the earliest stage of a startup and one of the most exciting ones as well. The pre-seed stage of a startup is when you have an idea and aren’t sure of its full potential. It starts with a simple seed of thought – a problem that won’t let you be.

What defines an idea in pre-seed stage?: The pre-seed stage either has an idea or a problem that you deeply care about. You know that there’s a problem that you want to solve and maybe vaguely have an idea how. The pre-seed stage has some characteristics that help us identify an idea.

Characteristics of a pre-seed stage startup:

1. You have an idea or hypothesis that already has some form of validation
2. Clear picture of type of solution, uniqueness of the value you’ll provide
3. You’ve created a Business Model Canvas
4. You have initial idea of a business plan

In the pre-seed stage, you have a lot of flexibility. The idea is in its early stages that gives a wide scope for change and adaptation. At this stage, you will have an idea, some indication of size and shape of the market. You may even have some people interested in buying a product or have conducted customer interviews.

The best way to classify a pre-seed stage startup is that you still don’t have a product. A great pre-seed stage has a business model canvas or business plan.

Seed Stage – Startup Phases

A seed stage startup Trying to create something representative of your final solution. For some ideas, it can be a minimum viable product or a prototype.

Characteristics of a seed stage startup:

1. You’ve created a business plan
2. Completed startup pitchdeck
3. Clear indication of what you need to develop product

This can be a great stage to join an accelerator to help build your business fundamentals. If not an accelerator, I’d recommend at least being a part of an incubator that can help build your idea.

Early stage Startup

What is an early stage startup?: An early stage startup has a business idea and some form a prototype or MVP of the product. Ideally at an early stage, you’ll also have a friendly customer with whom you’re building the product. At this stage, the best outcome can be to have a verified product and a waitlist of customers wanting to use your product. Make sure that you’re in a reputed accelerator by this stage – it adds to your credibility as a founder. (related: What Startup accelerators do to your idea)

What will you have in early stage startup:

1. A clear idea of what your future product line will be
2. Go To market and pricing strategy completed for your product
3. Solid founding team and key members of the business.

This is a great stage of the business, filled with uncertainty and potential. The best benefit your have at this stage of startup is your agility and quick response. Keep an eye out for some government grants or awards that can add huge credibility for your business idea. Make sure that you have adequate time to raise funds because this stage will take loads of your time.

Growth Stage – Stages of Startup

This is what the startup is all about. While talking about the difference between startup and small business, we talk extensively about the ability to grow and become wide. This is where the startup can propel and go on to achieve great things. You’ll hear terms such as Series A, B, C and D depending on the type of funding and scalability of your startup. A general rule of thumb is that higher the number – greater the ability of startup to scale and grow immensely.

At this stage, you’ll see explosive changes in your startup and you’d have started becoming more corporate.

What will you have as a prerequisite for the growths stage of your startup?

1. You’ll have achieved the product market fit
2. A reliable set of beta customers/partners
3. Credible income sources

Exit Stage

Usually most entrepreneur dreams are sold on the exit stage. Most founders don’t make money in their salaries – the salary usually provides for a fair standard of life. You’d usually be paid less than the market rate, however you’re well compensated in shares and employee stocks. This happens with most people who are your early employees and core startup team.

There are various types of exit in a startup. Make sure that you have a clear exit strategy almost from the start of your startup idea. Investors are usually interested in your exit strategy – mostly because this is where they get their return on investment. An exit can be Management buy out, or going IPO. But this is very big and the startup has already created massive waves in the company. If you’ve ever looked at the hockey curve growth dream of an entrepreneur, the exit is what it is all about.