6 stages of Digital Startup business

stages of startup

If you are reading this post, I can assume that you have an idea and you are on your way to build your startup or else you have a deep desire to build one. Don’t worry, you are not alone in your journey. Building startups seems to be the only thing on the mind of every professional.

For a long time, the venture capital world has often correlated the ability to build a successful startup with the age & experience of individuals. Not anymore.  According to a Harvard Business Review report, the average age at founding (a startup) was just over 31, and the median was 30.

 

Startup Founder Age of VC Backed Companies
Startup Founder Age of VC Backed Companies

However, age has nothing to do with the stages of startup but interestingly it can increase or decrease the duration of your pre-startup period.

Now if you search on the Google, you would find different views & opinions about the stages of startup business. Frankly speaking, none of them is incorrect. But the one which has simplified it considerably is created by StartupCommons (see below):

 

Startup Development Phases & Lifecycle
Startup Development Phases & Lifecycle

Key stages of digital startup

Stage I : Ideation

In this stage, the startup founder(s) builds, sharpens, polishes their “potential scalable product or service idea” for a big enough “target market“. There is no need for any team or resources at this stage of startup. A significant amount of time goes into the market research, collecting data about primary & secondary audience. The end outcome is a very simplified 30,000 feet business plan document that defines all the key variables about your business in a nutshell. Most importantly, at the end of this stage you should know, who would pay for your product & service & why?

Also read: How to write a business plan document by Sequoia Capital

Stage II : Concept Development

Once you are convinced about your core startup idea, the next stage is to find your core team of people whom you would want to be part of your journey. A lot of startups (especially tech startups where founders are programmers and core architects) want to keep their idea within the closed room till they get the venture fund. Usually it delays the project considerably as they end up doing a lot of non specialised tasks by themselves.

In the concept development phase, you should start creating your actual business plan with estimated financials  of budgets, possible revenue and key company milestones for the next 2-3 years. Identifying your core team and involving them in the ideation process is absolutely critical as this would set the stage for actual business roll-out.

Stage III : Commitment

This is the stage when the founders actually start building the MVP or Minimum Viable Product for the users to test their business idea. According to Techopedia:

A minimum viable product (MVP) is a development technique in which a new product or website is developed with sufficient features to satisfy early adopters. The final, complete set of features is only designed and developed after considering feedback from the product’s initial users.

In case of services business MVP, it needs to build the tools for service delivery like wireframe of CRM for customer lifecycle management and how it would be linked with an online customer acquisition and final service delivery.

An MVP is one of the most important stages in any startup business. Not just it allows the founders to calibrate their efforts & product idea, it is the stage when you can start marketing about your product/service to prospect angel investors (not VCs).  The commitment stage is also critical to define the roles of the founding team & the shareholding pattern for the first 2-3 years of business.

Most of the early stage hiring happens during this stage of startup. The team size are thin and the founders literally bootstrap it to the maximum by doing multiple roles.

Also read: How to hire for bootstrap startup?

Stage IV : Validation

‘Validation’ or ‘proof of concept’ is one of those stages of startup business where they have to live with a great degree of vulnerability, both from inside & outside. In the validation stage, founding team has to show maximum value for all stakeholders, starting from its current customers, its employees to current angel (if any) & potential investors.

In many ways, this stage decides the fate of your business idea, and hence it gives the maximum stress to the startup owners.

On one side, the founders are struggling to find the right product strategy & brand positioning that would allow them to attract potential Series A/B venture investment, and on the other side, there is a continuous pressure to show some running profits and ensure customer delight. Incidentally, most of the startups lose their plot during this stage of business.

 

Also read: Worldwide Failed Startup Trends

Stage V : Scaling Up

This stage usually start after you’ve received your Series A investment and now you are looking to scale the length & breadth of your business operations. A significant amount of time goes into hiring resources, marketing your product in the target markets to key audience, building a strong word of mouth PR, and accelerating your quarter on quarter revenues.

Stage VI : Growth

This stage is actually subject to how your business idea has performed. Once you’ve achieved a critical mass of customers, you enter the growth stage in which you can diversify your business through possible acquisitions of smaller companies or you can enter newer markets by raising more venture fund. Fundamentally, there is no fixed time duration to this stage as most of the startups want to remain in the startup mode for a long time.