The Five Stages of the Startup Lifecycle

People have differing points of view on the lifecycle stages of a startup, the one I like to use is the Lean Startup approach consisting of the following five stages:

1. DISCOVER   >   2. VALIDATION   >   3. EFFICIECY   >   4. SCALE   >   5. SUSTAIN & PRESERVE


Each stage has its own constituent parts, each of which are essential for the successful completion of that stage. As your startup progresses from one stage to the next, it progressively becomes more predictable and uncertainty decreases. It also morphs from a core team of generalists into a larger, more structured team of specialists with defined roles and responsibilities. 

 

The Five Stages of the Startup Lifecycle

 

Stage 1: Discovery (~ 5-7 months)

The Discovery stage is when the venture is a mere idea for solving a problem in the entrepreneur’s mind.

The Discovery stage is meant to test if the problem, solution (your product) and customer hypotheses are correct. The main goal of the stage is to discover whether or not the idea has any real potential, answering the questions:

  • Is the business solving an important problem with the proposed solution? 
  • Is there a larger enough base of customers interested in that solution?

In this stage you’ll focus on:

  1. Building your team
  2. Doing customer interviews
  3. Defining a value proposition
  4. Developing a minimal viable product (MVP)
  5. Finding a mentor
  6. Getting initial funding (probably from family and friends)

Necessary financing in the Discovery stage generally falls between $10k – 50k.

 

Stage 2: Validation  (~ 3-5 months)

The Validation stage validates that the customers interviewed in the Discovery stage, who expressed interest in your product, are in fact truly interested, and most importantly, willing to step up to purchase it.

The goal of this stage is to prove that the business has a repeatable, scalable business model and can deliver enough customers to become sustainable.

In this stage you’ll focus on:

  1. Launching your minimal viable product (MVP)
  2. Collecting early customer feedback
  3. Refining core features
  4. Generating initial user growth
  5. Finding and implementing key metrics
  6. Securing funding
  7. Building out the team
  8. Pivoting (if necessary, say if feedback and/or metrics call for it), finding paying customers and developing the product market fit.

For the Validation stage, you’ll need financing between $100k – 1.5M.

Mid-Stage Pulse Check

You’ve successfully completed the Discovery and Validation stages when you’ve verified your product’s demand, market focus and target customers, established 
pricing and sales strategies, and determined your marketing processes. Only after you have successfully completed these two stages should you proceed to the Efficiency stage.

 

Stage 3: Efficiency (~ 5-6 months)

The Efficiency stage builds on your initial sales successes during Validation. In this stage, the startup uses knowledge gained from the prior two stages to continuously and efficiently acquire new customers and generate value.

The goal is to perfect the business model to drive customer acquisition, create customer demand and translate that demand into increased sales. This stage is entirely dependent on the successful completion of the Discovery and Validation stages. In the Efficiency stage, one can begin to control and refine the startup’s spending on marketing and research because there will now be the presence of a paying customer base.

In this stage you’ll focus on:

  1. Refining the value proposition
  2. Determining revenue models
  3. Upgrading the user experience
  4. Finding a profitable conversion funnel
  5. Achieving viral growth
  6. Finalizing efficient marketing models
  7. Establishing scalable customer acquisition channels and sales models.

Financing the Efficiency stage should come from the money you’ve already raised and the sales being generating—the idea being to hold off taking any new funding until the next stage.

 

Stage 4: Scale (~ 7-9 months)

Upon completion of the previous three stages, the entrepreneur has a successful and efficient startup that can be built into a full scale company.

This is the time when the business needs to change gears and drive towards generating large scale profits by investing to yield significant results.

In this stage you’ll focus on:

  1. Increasing your workforce
  2. Commercializing the brand
  3. Building a solid infrastructure of systems (billing, invoicing, etc)
  4. Pushing towards substantial customer acquisition
  5. Improving processes (automating as many as possible)
  6. Creating formal company departments
  7. Hiring expert executives to head up departments
  8. Raising a Series A round of financing to fund all this growth

For the Scale stage, you’ll need financing between $1.5M – 7M (depending on the business).

 

Stage 5: Sustain & Preserve

After you’ve scaled your startup into a fully formed and profitable company, the goal going forward will be to ensure its continued growth and sustainability.

To that end, you’ll want to be continuously measuring performance and learning about customer and market needs.

In this stage you’ll focus on—through an ongoing, iterative process of Testing > Learning > Applying:

  1. Continuously improving product and operations
  2. Driving sustainable revenues
April 5, 2020
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