Life cycle of a startup company and Winning strategies in every stage of a startup
Startup starts from an idea. But ideas are not everything to get success in business. Proper execution of ideas is needed in every stage of startup. In most of the cases a good idea fails to be a successful startup lacking proper planning and execution. So before starting a startup it is very essential to get knowledge about the life cycle of a startup and most important thing is to know the winning strategies of every stage of startup.
Startup begins from idea stage and ends in exit stage. Exit can happen by selling the startup to a giant company with a heavy price or taking it to the next level internationally. Every stage of startup has some challenges. An appropriate understanding of startup life cycle will help you to know:
- In which stages your company is present?
- What are the challenges of each stage?
- How to solve the problems created in every stage?
- What decisions should be made in each and every phase?
- What are the funding sources of different stages?
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| Stages of Startup Lifecycle |
In a startup lifecycle there are 7 stages in its development process. Startup is not a traditional business so these 7 stages are designed for the fastest growth of the company. Here's a look at 7 stages of startup and their challenges, funding sources with winning strategies of every stage.
- Idea and Research Stage
- MVP and Problem/Solution Fit Stage
- Validation and Seed Stage
- Product/Market Fit and polishing Stage
- Growth and Scaling Stage
- Established and Mature Stage
- Exit and IPO Stage
Idea and Research Stage
Idea and research stage is the beginning of the startup lifecycle when an idea comes out from an existing problem of a society/country. This is the birth stage of your startup. That's why you have to research, analyze, and make a proper execution plan of your concept or idea.
Challenges:
An idea can be outstanding to you but it should be really useful to the customers. To find out a profitable idea which will actually relieve the customers pain points is the main challenge in the idea stage. Market acceptance, finding a proper market segment, establishing a business structure and determining the profitability of the concept are some important challenges in this stage.
Sources of funding:
All these research and analysis have to do with personal investments. Because in the idea stage you have to work all alone or can make a team with some members considering a low budget. Friends and family, customers, suppliers, banks and government grants also can be the source of funds in the initial phase of startup.
Winning Strategies:
An exceptional idea with proper execution planning can make a million-dollar startup. In most of the time lacking a perfect plan a unique idea goes to trash. On the other side with proper planning a normal idea with some innovation can gain success. Appropriate research on the target audience and existing competitors of the market, realizing the customer psychology, finding out the gaps of competitors, determining the cost structure and profitability of your idea, making a structural business planning and setting a development goal can be the winning strategies for your startup. Please don’t be overconfident about your idea without proper market research.
MVP and Problem/Solution Fit Stage
After the idea stage you need to test the product to get feedback from early customers. Here comes the MVP and problem/solution fit stage. MVP stage is a crucial part of product development in any startup.
MVP stands for ‘minimum viable product’ and it is the initial feature of your first saleable product to validate the idea as well as business model with least investment. It was first introduced by Frank Robinson in 2001 but the term is popularized by Eric Reis, the author of ‘The Lean Startup’.
MVP helps to understand the strengths and weaknesses of the product. Then the startup reworks its offer and refine the product to establish the second phase of MVP. Thus, the offer is built gradually to minimize the costs and satisfy the demand. The product market fit is the time when the offer matches with the demand requirements.
Challenges:
Funding is the main challenge in this stage. Because you have to work with the least investment to create your first product. Finding out the target customers and their need to verify the product is also a great challenge. In product features what to include and what to exclude is very difficult to determine. If this is an app or any kind of digital product then content creation is another challenge to fit the product in the market.
Sources of funding:
You may have a great idea but investors are not interested to invest only on your idea. That's why in this stage funding is a big question. Investors may ask you to build a MVP first for giving money. Before then you have to work with your own personal savings. Same as idea stage friends and family, crowdfunding, credit cards, suppliers and customers can be the sources of funding in this stage. Always monitor your cost assuming risk.
Winning Strategies:
MVP minimizes the cost and risk. Besides it helps to validate your idea. That’s why it is very essential to figure out some strategies to overcome the challenges. MVP is not just a product. You have to consider it as a development process. Where you have to collect more and more information about your target customers. Time matters. As this is the first stage of product development you have to move fast with time. Hire expert stuff to create your product. Because a fresher or inexperienced employee will waste your time. Make a strong profitable business plan and give a perfect presentation to the investors as they will impress on your idea and make investment on your idea. Not include all features in your product in this stage. Just focus on the most valuable features which will really impress the users. For controlling cost, you need an experienced project manager who knows how to deliver a project on time and on budget.
Validation and Seed Stage
Seed stage starts from getting traction. That means you will get your first loyal customer. In this stage you have validated your idea and your product is already generating revenue acquiring new customers. In the seed stage the product is ready for production and sales. So, you have to be very careful in this crucial time because your company is legally established.
Challenges:
To establish a customer base is the main challenge in this stage. At the same time, you have to struggle to set up your market presence in the competitive market places. To maintain excessive money flow is another difficulty in the seed stage. Secure the customer data and monetary management are other challenges in this phase.
Sources of funding:
Without friends and family in this stage you can approach your idea or product or startup towards investment firms. Venture Capitalists can willingly provide funds for your startup company. In exchange VC or investment firms will get some share of your company’s equity.
Winning strategies:
To establish a customer base do online and offline marketing. It will also help to establish your market presence. Spread your product or service news in social media. Make sure your target is for the right and specific audience. Make a dynamic data management system to secure your customer data. Set up a strong finance team to maintain the monetary management which helps you to reduce the excessive money flow. And always collect valuable information or feedback about your product from customers. Most important is to gain customer trust.
Product-Market Fit and Polishing Stage
Product-market fit means polish up your product to meet the demands of your target market. On the basis of your customers' feedback and their pain-points you have achieved a viable product-market fit and now you are starting to gain customer retention. And customer retention is the gold standard by which you can measure the product-market fit. Feedback from your early adopters will help you to refine your product or service. To make it more efficient polish up your business process or model.
Challenges:
To collect feedback from customers, to identify the process of polishing the product and business model, to gain customer trust, to maintain cash flow and to manage the investment are some of the major challenges in this stage of startup.
Sources of funding:
Banks, investors, profits, grants, leasing companies, and partnerships are the sources of funds in this phase. Banks can give you loans with low interest rates and in return they don’t require your company’s equity.
Winning strategies:
Do online campaigns, make advertisements on social media will help to collect feedback from customers. Remove the features that don’t convert. Hire professionals to refine the powerful sides of the brand. For this you need a superstar designer as your UI expert. Invest more and more to promote your strongest features. Hire expert to manage your cash flow and investment. By this process you can gain customer trust.
Growth and scaling stage
In which moment the elements of the business model are structured in a sustainable way and generate revenue by acquiring more and more new customers that is called the growth stage. And it is the time to scale up your business. New business opportunities are opened in this phase. Competition increased dramatically in the growth stage.
Challenges:
Dealing with competition, managing a huge amount of revenue, using resources in an effective way, serving customers and hiring new workers are some of the important challenges in this period.
Sources of funding:
Profits, banks loan, partnerships, angel investors and VC are the sources of money in this stage.
Winning strategies:
Sales and customers both increase rapidly in this phase. So, you should focus on managing the business properly. Recruit new workers or professionals to manage the business. Build up your own technology or system to serve a vast number of customers. Grab the new opportunities and release new products and services to cover in new markets. Quality accounting and management system should be developed. These strategies will help you to survive in the competitive market.
Established and Mature Stage
After completion of all the previous stages when your startup becomes a successful business enterprise with a finer place in the industry possessing many loyal customers, that time is called the established and mature stage. It formulated a structured established enterprise. It is time to move forward as an international company by expanding your business abroad.
Challenges:
Expanding business abroad, analyzing the changing market, coping up with the competitive market, increasing the customer retention rate, refining the products as well as business strategies and managing the finance are the greatest challenges in the mature stage.
Dropping sales, profits and negative cash flow are some biggest issues in this stage. Because a startup can not survive long with a negative cash flow.
Sources of funding:
The profit of product sales, banks loan, investors, governments, suppliers and owners are the sources of money in the mature stage.
Winning strategies:
Market becomes competitive day by day. Economy and customer tastes change very quickly. These issues can end your business and hard-work all of a sudden. Stay focused on these crucial issues. Add automation to improve productivity. Focus on the business improvement by better business practices along with outsourcing. Make improvement on marketing and sales, personnel management skills and business planning. Look for better opportunities to expand your business internationally. Limiting yourself to your local or national market is the biggest mistake in this stage. Never stop learning, experimenting and challenging yourself.
Exit and IPO Stage
In this stage your company has secured a strong position in the market with steady profits having a powerful management team. Here the founder of a startup has two choices: continue with the company or exiting through acquisition. If you are thinking big then you will be listing your company in the public markets. After listing in the IPO, it will not be considered as a startup anymore. As an example, being listed on the stock exchange Facebook and Google are not in the category of startup.
Challenges:
Making the right decisions, determining a realistic value as per current market place, dealing with financial aspects, building up new strategies and maintaining the rules and regulations of the public markets are some challenges of this phase.
Sources of funding:
After listing in the IPO, you need not to think about funding deeply. But if you want to sell or close down your startup then you should consult with your financial advisors for the best tax strategy. Immediately find a business valuation partners and investors as a supporting role.
Winning strategies:
Acquisition or IPO which is more beneficiary for you? Make a proper decision after analyzing all the aspects. If you want to continue with the company then gather knowledge about listing companies in the stock exchange. Hire expertise who has better knowledge about public markets. But if you want to quit from your company then determine the proper valuation of your startup business by taking help of professionals. To increase the startup worth to the buyer, measure the organization operations, management and competitive barriers.
Lastly, startups are dream projects for many entrepreneurs. A successful startup built after a long-time hard work as well as need dedication and passion. So, every step is important in the startup life cycle. Proper analysis is needed to make effective decisions in your startup journey. Because a wrong decision can end your years hard work at once. So be careful and have a happy startup life.