What Are the Different Stages of a Startup: An Introduction

Do you know that there are different stages of a startup? In this blog, we try to decipher the various stages that startups typically go through.

Stages of a Startup
Stages of a Startup

Hearing stories about 18-year-old college dropouts turning their dream into reality and sailing the success boat is endearing! Such stories are quite inspiring and serve as motivation for many to start and build their businesses. While it is a major step to get up and start, the next question in line would be ‘what stage is the startup at?’

What stage is the startup at? Well, this is a question that most startup owners are asked, but how do you know what stage you are at? Are you having the same question about your startup? Do not worry. this blog will help you understand the different stages of a startup. Reading this will help you identify where you stand.

Stages of a startup

There are four key stages that every startup goes through, and they are –

  1. Pre-startup stage
  2. Startup stage
  3. Scaling and Growth stage
  4. Maturity stage

1. The pre-startup stage

This stage is also termed the discovery stage or the identification stage. This is an especially important stage, especially for SaaS startups. This is the stage where you identify an existing problem and understand how your product or service solves the problem. This is the point where you do a lot of research and try to understand different perceptions about the problem. You will have to get involved in discussions to understand the problem you intend to solve.

This is the stage where the following things happen –

  1. Talk to the potential customers to gain deeper knowledge about the product
  2. Draft your mission and vision
  3. Make financial arrangements for the start-up
  4. Partner with a startup accelerator or an incubator
  5. Plan a minimum viable product to start with

This is also the stage where you will have to identify the possible risks and challenges to your business.  You may have already come up with an excellent business plan, implementation timeline, and also profitable marketing strategy; however, you may not have emphasized the importance of customer success at this stage. This could be a major risk and hamper your business’ growth. Planning for customer success from the initial stage is immensely helpful in aligning it with your core operations. Other risks may arise due to the lack of funding and the inability to find the right talent.

2. Startup

Once you have completed the background work during the pre-startup stage, your next task would be to put it all into action. The startup stage is also called the problem/solution fit stage. It is a memorable phase for most startups as it is the starting point of long-term relationships. As a SaaS startup, your biggest task would be to land your first customer. One of the most important things to note here is that your first customers could be your potential brand advocates and loyal customers as well. Keeping this in mind, you should focus more on providing them with the best service rather than planning for the next stage, i.e., scaling and growth. 

This is the stage where the following things happen –

  1. Working on the MVP and improving the core features, so you achieve the right product/market fit
  2. Hiring the key personnel who understand the mission/vision
  3. Getting the payment from customers
  4. Collecting the seed money

Along with an opportunity to reach the next level, the startup stage also has several risks. For instance, there is the challenge of approaching the wrong set of customers. When you approach the wrong set of audiences which are not interested in your product/ service, your efforts to gain traction are negatively impacted.

Another challenge could be the inability to attract enough customers to keep your cash flow running. Without the payments coming in from customers, it is difficult for startups to manage growing finances during this stage.

Overspending on customer acquisition is another major risk in this phase. As we have already discussed, the startup stage is where you build relationships. For this, you must focus and allocate your resources for bettering the product/ service. This should be the priority rather than overspending on new customer acquisitions.

Note: The initial success due to a good response from the initial set of customers could tempt you into considering premature scaling. But resist this temptation.  According to Startup Genome Project, startups will require a lot of time to validate their market. Founders who underestimate this end up failing to grow.

3. Growth

The next stage is the scaling and growth stage. This is the most important stage in your journey as it is the phase of expansion of the business – it is the stage where you go from being a startup to becoming an enterprise. If you find yourself in this stage, congratulations!

In the startup stage, you have already strategized and fixed the processes that work best for you. You have also established yourself in the market. Now, your next step will be expansion. You will do just that in the scaling and growth stage.

While your focus is on generating revenue and keeping the cash flowing in the startup stage, the scaling and growth stage is about profit generation. At the same time, your SaaS business will have to accommodate increasing capital requirements to support the aggressive scaling and customer acquisition.

This is the stage where the following things happen –

  1. Planning for Series A funding
  2. Hiring top layer executives
  3. Aggressively acquiring customers
  4. Planning customer retention activities
  5. Scaling improvements on the back-end
  6. Putting analytics and testing (A/B testing and Split-testing) processes in place
  7. Building an efficient sales process
  8. Alignment of the product, sales, and marketing teams

As a SaaS startup, you will have to understand that the scaling and growth stage can be very expensive. You need to invest in several things, including marketing, customer acquisition and retention, scaling, and aggressive hiring of top talents. You must allocate decent funds for these tasks. However, make sure that your expenditure does not scale faster than the revenue.

You may also face several risks that could potentially hamper your growth. One such challenge would be the emergence of competitors in the market. As you grow and your product/ service becomes a success, there is the threat of competitors mimicking your offer. Having a robust business model for handling this threat is helpful.

Hiring mistakes and the inability to manage the resource could also be a major problem at this stage. This will not only slow your growth but will also impact your company culture. To handle this, make sure that you hire the right executives with the right leadership qualities to inspire and motivate the rest of the team.

4. Maturity

The next stage is the maturity stage. This is when your customers know about you and the product/ service they bought. You may not see the dramatic change you have witnessed in the growth stage, where your numbers increased significantly. While the growth is comparatively slow in this stage, you must keep it going. You will have to come up with new ways to keep growing.

The best example is Apple. When it hit the maturity stage, the tech giant diversified its products and services and also expanded into newer markets. Following a similar approach, you should be able to improve your offering by adding new features to it.

This is the stage where the following things happen –

  1. Looking for new opportunities and expansion in new markets
  2. Planning to improve current product/ service and/ or add new products
  3. Plan for an IPO
  4. Prepare an exit strategy

Like the other three stages discussed, the maturity stage also has certain risks and challenges. One of the biggest challenges would be market expansion. Expanding into markets that are not ready for your offering would be a mistake and cost your resources.

Key resources leaving the company is yet another challenge. This could impact key decision-making as well as the morale of the team members. Therefore, it is important to reduce attrition as much as possible.

This is the stage where you will notice a major shift in your company’s activities. But once you have attained stability, you take the prime spot! Your competitors look up to you and so do your customers. Therefore, you need to maintain the balance, and keep growing your core business. At the same time, it is also advised to have an exit strategy handy.

Wrapping up

Be it a SaaS startup or a product startup, you will find yourself in one of these stages, and to reach the next stage in your startup journey, you should focus on customer success. Customer success has taken the front seat in determining a company’s success.29

Trying to build stronger customer success? We can help you! Contact for more information.

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