Startups aren’t built overnight. It takes time, resources and a lot of equity to get them off the ground. People who are embarking on such a journey are often surprised to learn of just how involved the process is. There are several startup stages that the entrepreneur must navigate in order to achieve success in their endeavors.
The first stage is the Concept Stage. This is the stage where entrepreneurs work out the concept or vision. No specific actions are necessarily taken, but the vision is shaped. As the vision solidifies, the person advances to the next stage in the startup phase.
The second stage is the Seed Stage. The seed stage is the stage where capital is generated. This is the stage where investments are made into the venture. The typical source of investments during this stage typically comes from friends and family. Seed capital is usually recovered by investors on the back-end with conditions such as percentage of the revenue generated. Milestones and deliverables must be achieved in order to advance the business to the next stage.
At this stage, third parties typically enter the process. The company’s capacity to attract third parties speaks to the value of the concept. In validating the concept and the promise of the venture, the company receives additional support to accelerate growth. Additional angel investors may be attracted at this stage.
The growth stage consists of growth in sales. The growth is facilitated by follow-up financing. The financing comes from various investing groups. Common investor profiles include angel groups, angel syndicates, VCs, and super angels. In your ability to attract investors continuously, you can be confident that your business model works. Pitching is a common practice during this stage in business.
Venture capital financing is usually the core of this stage. This is the stage where businesses position themselves to enter new markets via business channels, marketing practices, or customer segments. Most startups are either already semi-established and profitable. Others may be in the process of improving their cash flow. Investors may be open to joining the organization and additional rounds of funding may occur at this particular stage. Pitching to VCs requires making a compelling pitch to win their confidence. When pitching, individuals should be prepared to discuss a range of topics to assess the potential of a solid ROI.
The mezzanine stage consists of scaling to make a product more commercially accessible to the public. At this stage, the revenue is solid, and the company is well-financed. Any funds raised at this stage are specifically for expansion into new markets. Potential mergers, IPOS and opportunities for acquisitions are likely to occur at this stage. If the IPO occurs, the investor is paid back with profits.
During the final stages, the company may be prime for being sold to another company. This marks the stage where the company has built enough value to be profitable. This stage is viewed as the exit stage.