The Essential Stages of Startup Development: From Idea to Success
Have you ever rolled a big ball of snow? It's a very simplistic analogy, but launching a startup is sort of like that. You begin with a small palm-size idea, and as you start rolling the snowball on the ground, it grows bigger. You're the one to choose the angles and direction, make the shape, remove rugged chunks, and ensure the edges are smooth by patting them down tight.
But how does your bite-size idea grow to become a full-fledged company? What's the common route? On this page, we'll go over the key startup stages of development.
Major Phases of a Startup Based on Funding
Startup development can be overviewed according to its financial evolution or lifecycle. From this angle, a startup's journey goes from idea initiation to making an exit.
Of course, this isn't a rule of thumb, as there is no conventional classification of the startup stages. Some companies don't make it all the way to an acquisition or decide to take a drastically different turn based on their business strategy. But, in essence, it goes something like this:
The journey of a startup begins with an idea. A founder discovers a problem that needs to be solved or notices a user pain point or a market gap that can be filled. At this point, the person decides to take a shot at making a startup.
Stage 1: Pre-Seed
This is the earliest funding stage when the founder usually doesn't use external funds. At the most, this could be money from family or friends who aren't provided with any startup equity or shares in return. At times, though, they get loans or turn to micro-VCs or incubators.
The founder uses this pre-seed time to do thorough research, ensure the idea's feasibility, and work on a proof-of-concept. It's all about learning more about the customers' needs and the market state, which helps define the company's mission and goals and document what you're aiming to achieve. This will also help you establish a startup culture.
During this phase, it's crucial to determine the company name, as it will form the foundation of your brand identity. Additionally, understanding your competitors and identifying potential challenges will give you a strategic advantage. Networking with potential investors and industry experts can also provide valuable insights and resources. Ultimately, these efforts will prepare you to create a strong business plan and set the stage for future success.
Stage 2: Seed
The business is still in the early stages, yet, it is ready to move on with further idea or hypothesis validation. Founders often make prototypes or use simple MVP types like landing pages or fake doors to test interest and demand. They continue researching, refining the execution plan, and sculpting the essentials of the future product.
At this point, startups may continue running using personal resources, yet some decide to opt for types of startup funding like crowdfunding or start seeking angel investors who'll provide support.
Others try to apply to top accelerator programs to obtain expert guidance, get early investment, and achieve rapid growth. The results of those who become part of such a 3 to 6-month program are impressive. Yet, the competition is tense (with under 5% of companies making the cut). Usually, those stand-out startups with a clear business plan and a working product with traction have higher chances of getting accepted.
Stage 3: Series A, B, C
These phases entail working on developing or improving an early version of the product that can be demonstrated when pitching to investors.
At this point, the startup is typically:
- officially registered (has gone through startup incorporation);
- has a core team and startup organizational structure;
- visible traction or steady revenue;
- stable operations and processes.
Founders frequently look for external funding opportunities to facilitate further growth and startup development. They reach out to Venture Capitalists or investors to raise capital, presenting a detailed pitch deck that includes various project fundamentals like the business plan, current traction, financial prognoses, and other vitals.
It is considered a best practice to have a functioning product and data at hand to convince investors. That's why a successful MVP pitch generally means that the product has already gained traction.
Stage 4: Expansion and Growth Stage
Startup scaling becomes possible with expanded funding or resources. As the company matures, teams work on acquiring more customers, winning a larger market, and don't stop learning and iterating to enhance the product and offering.
The team expands, and it applies various startup growth strategies to take the product and revenue to a new level. This may mean pouring more resources into marketing, strengthening the online presence, redesigning the product, and releasing new features.
Stage 5: Making an Exit
Many startups strive to get acquired by big successful companies. If they are willing to sell the whole business, it moves on to the IPO (Initial Public Offering) after thorough startup valuation.
When another company shows interest in buying out the startup, it generally initiates a technical due diligence procedure to ensure that the project's documentation and quality are in key with what was claimed. When all parties are satisfied with the terms, they strike a deal, which is considered one of the final startup phases.
3 Key Startup Development Stages
Finance isn't the only way to look at the phases. What are the stages of a startup from the product perspective? Let's take a look at the evolution of a startup's product as it moves in the product development life cycle from an idea to the desired outcomes.
Pre-MVP Phase
Idea and Research
An idea is the heart of any project. The founder can shortlist several non-tech or tech startup ideas and then spend time on market research to evaluate their feasibility. It's vital to study the competition, existing solutions, and market dynamics during these early stages of startup life to ascertain that it has a chance to become something worthwhile.
When the concept is checked, the discovery phase begins, during which you outline the major fundamentals of the project and strategy, including the:
- vision and mission;
- aims and goals;
- target customers;
- main competitors;
- startup tech stack;
- prioritized features;
- timeline with milestones;
- required resources;
- possible risks;
- and other fundamentals.
Planning
Planning implies lining out how to execute the project and how to prepare it for scaling in the future. Apart from that, the founder has to figure out all the legal peculiarities of business registration. Each region has its own set of rules, therefore, the matter requires careful consideration.
Moreover, the planning step includes calculating the overall startup budget. Regardless of whether the company funds itself or uses outside investment, the calculations have to mind various aspects, from payrolls and rent to equipment, software, operational costs, and an emergency "stash".
Similarly, it is important to go through the project cost estimation process to get a clear understanding of how much money is needed to create the product's first version. You have to plan ahead, thinking through how you'll distribute the resources to avoid running out of money.
Team Formation
Depending on the scale and scope of the project, the founder might need to find people to help build the product and run the startup. The step might imply hiring developers for a startup, as well as employees for other important roles like accounting, sales, and marketing.
Certainly, there are alternatives to employing people to join the team full-time. Startups commonly find freelancers or turn to vendors that can help augment teams. When it comes to in-house vs. outsourcing software development, there are several benefits of the second path as the latter allows to shorten the recruitment process, get access to a qualified team quickly, and accelerate the time-to-market.
MVP Phase
Design and Prototyping
Once the plan and team are in place, the MVP design phase starts. It's an integral step of startup development. Designers work on wireframes, mockups, user stories, and clickable prototypes to envision and test how the product should look and work. The team then moves from prototype to MVP creation.
Making a Minimum Viable Product
When the MVP development process is initiated, the developers begin building the product according to the designs. They focus on the selected features and the core functionality that best transmits the product's essence. Other more intricate features will be added on after the pilot is launched.
Testing and Launch
Although QA testing is carried out throughout the whole development process, the product has to pass the final regression testing before release. Any allocated glitches, bugs, issues, or flaws need to be taken care of before the launch. But, in any case, the quality assurance team continues to monitor the product's state after release.
Post-MVP Phase
Data Analysis
What happens after MVP release? Now that the product is out in the real world and gaining traction, startups start collecting various incoming data and product performance metrics. Because customer opinions matter, studying feedback is essential. The same goes for monitoring customer behavior, market changes, and trends.
Devoting time to startup analytics makes it possible to find answers to many questions, like how to proceed with the minimum viable product most optimally. By tracking and analyzing vital metrics (like the bounce rate or average session duration), startup teams make hypotheses and modify their OKRs and KPIs according to the obtained insights.
Product Improvement
Startups usually apply different kinds of MVP testing methods to ensure they're on the right track. They use data to make informed decisions on what to change and which findings to act on. This means that they review the initial plan and amend it accordingly, shifting priorities from time to time to achieve growth and startup development.
However, at times, the market can quickly shift, or some unpredictable changes will require a fast business pivot to keep the startup to stay afloat. Then, only adaptivity, agility, and openness to change can make a difference.
Further Growth and Scaling
The product development roadmap gets amended if the plans change. And the direction the product goes depends on each startup's strategy.
Falling back on the snowball analogy, maybe you'll want to make a snowman, a snow sculpture, an igloo, or something else? Perhaps, the product can be fitted with new features or get a fancy new redesign to become a minimum lovable product that users will enjoy interacting with.
As the company continues its path toward finding product-market fit, the solution gets altered and upgraded. The lean startup methodology revolves around constant learning. This implies being on the lookout for changes and being flexible about the need to tweak the plan or the product.
Further growth can also mean finding new markets, niches, or customer segments, partnering up with other organizations, and might require additional resources and team scaling.
Final Thoughts on the Startup Development Phases
As you see, startup development is a lengthy process. There are various startup stages that you can pass as the product and company grow, but, certainly, every startup's path is unique. Some aren't fortunate enough to stand fast, stagnate, fail to secure capital, or release a product of poor quality that doesn't take off. While others achieve immense success even if they don't aim to make an exit.
If you need a hand, Upsilon can help you build or scale your product regardless of where you stand. For quite a while now, we've been providing MVP development services for early-stage startups that have a necessity for a tech team and have been backing up growth-stage startups that need expert technical support with IT team augmentation services. So, don't be shy to contact us to discuss your needs, we'll be pleased to assist!
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