Building a successful startup is a long journey, so you should know the path that you will be following. Each phase of the startup’s lifecycle faces lots of challenges that can either foster or ruin a newly created business. Read our article and find out more about 6 essential startup development stages.
Startup development stages – table of contents:
- Startup development stages
- Pre-seed stage
- Seed stage
- Early stage
- Growth stage
- Expansion stage
- Exit phase
Startup development stages
The essence of every startup is to grow and reach the stage where you can turn it into a public company, ready for global expansion. Unfortunately, 90% of startups do not enter the final phase of development, and 10% of them do not even get beyond the first or second one.
The most common reason startups fail is misreading market demand (42%), followed by a lack of funding (29%). Those projects that manage to survive go through six phases of development. Facebook, Airbnb, Twitter, LinkedIn or Uber are examples of such successful companies. What are 6 essential startup development stages?
It all starts with the pre-seed phase, also considered as the idea phase. At this moment, you analyze the market, search for a niche in which you want to deveop your product, and give your idea some shape. This is also when you should ask yourself a few questions:
- Is my solution a real answer to the problem at hand?
- How can my solution impact the market?
- Is it similar to other solutions already present in the market?
At the pre-seed stage, you define the company’s vision and mission, establish critical milestones, develop an action plan to achieve your business goals, and concentrate on real customer needs.
At the seed stage, your business becomes more organized and you usually have a team of experts on board. One of its main objectives is to validate the initial business idea. Your task now is to develop an early product prototype so you could present it to potential investors and define user interests. It doesn’t need to be as functional and viable as an MVP (Minimum Viable Product) yet.You’re still developing and testing it to determine its feasibility.Bootstrapping is an incredibly popular method for funding a new business in the seed stage of its development. To put it in a nutshell, it means using your personal resources in order to scale your startup. However, you may also consider acquiring funds from angel investors, crowdfunding and grants.
By now, you own a legal business with a basic organizational structure. At this point you are still improving your MVPs and conduct ongoing market research.
As you probably run out of money while bootstrapping, it’s time to opt for external funding to get your company up and running. Therefore, you must create a detailed business plan and try to to identify investors who would be willing to pass on funds to you. This is an ideal opportunity that allows startups to scale up across various markets.
The growth phase is considered to be one of the toughest stages of startup development. Most young businesses don’t even get to this point. Your company has now attracted a large number of customers and reached a steady source of income. This is when you lose control over the whole venture as you are forced to hire appropriate management professionals.
External funding is still quite important here since it is difficult to talk about rapid development without it. At the end of the growth stage, your company should have a well-crafted marketing strategy, a budget and team to meet its current needs.
At this stage your business starts expanding to new markets and sectors. It can be easier to find investors now as they trust the startup to succeed. During this phase, your startup may acquire other companies, develop novel technologies and create complementary products.
New people join the board of directors, and with them comes the fresh know-how. It is highly recommended to measure risks and set realistic goals now as many companies overestimate their capabilities here and eventually fail.
This is the last phase of the startup development process. One might say that it is a culmination of your hard work. Also, investors can finally earn a profit. The exit phase may end either with the sale of your startup or its IPO (Initial Public Offering). This is the stage when your company becomes known in several markets, and often gains a global reach.
Startup development stages – summary
Launching a startup takes a lot of work and planning. Most projects don’t make it beyond the initial development stages, or even beyond the idea phase. However, if you’re a self-motivated, passionate and creative person with an innovative idea, you are already on the right track.
Read also: Successful startup by hiring freelancers.
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