Stages of the startup lifecycle
Birth, growth, reproduction, and death. In the same way as humans go through life stages, startups go through phases that entrepreneurs should be aware of in order to effectively guide their projects.
Max Marmer, founder of Startup Genome, presents six. It seems essential to know how to face each of them so the startup survives:
Your first task as an entrepreneur is to consider how you would like to change the world. Identify a problem, come up with a solution and see if anyone – especially potential users and clients – might be interested in your idea.
Beyond the possibility of getting accepted in a startup accelerator and gathering funds from family and friends, this first phase requires developing the minimum viable product (MVP) that will enable surveying the market and getting a sense of the project’s acceptance.
This is what Dropbox did at the beginning. The cloud storage website published a video explaining its service using an MVP and, furthermore, the appearance it would have. This video was one of the strategies that enabled the company to reach 75,000 users whilst in beta form.
A startup’s service or products go from being hypothetical solutions to a problem to hitting the street and looking for the first clients ready to pay for it. At this stage, money will be the only way to effectively measure whether the public validates your project.
This is precisely what growing numbers of technological companies do when starting crowdfunding campaigns.
Pebble, the record-breaking smartwatch, managed to raise $10million in Kickstarter. This is an impressive example of crowdfunding validation. People wanted a smartwatch, and they were willing to pay for it in advance.
In order to successfully overcome this third phase, the best allies will be market studies and, more than ever, the advice of a good investor. Listen to the voice of experience.
At this point, the entrepreneur has to analyse characteristics and variables of everything that surrounds the startup (market, clients, etc.) in order to find the business model that adjusts best to the environment.The aim is to increase the customer base in the most effective way possible, preventing growth from stifling the project.
It is time to prove the business’s scalability – its capacity to grow in a sustainable manner (keeping costs down). The startup has to be ready to fight in international markets and offer great margins of benefit. It is time to step on the gas and push the growth aggressively – it is time for the larger fundraising rounds.
That is how Airbnb and the controversial Uber have managed to grow to the point of being present in countless corners globally. A couple of fundraising rounds of over $1billion in the first case, and around $0.5billion in the second, show how these are good examples of internationalisation..
Once the step has been taken to reach other markets with support of large fundraising rounds, it is time to shore up the project’s bases so the structure that youhave put so much effort into building does not collapse.
Maximising benefits and facing problems derived from the global dimension that the startup has acquired are key in this phase. The greatest risk is taking for granted that, having reached certain success, everything is done. Don’t stand by to admire your product; there are problems that can put the longevity of your business project at risk.
Sale or renewal
Your business model works, or is at least credible. You have the funding needed to internationalise the company, and you have carried it out successfully. Now what? Experience tells us that there are two ways: to sell the startup to a giant (Google, Facebook, Apple…) or to go public and try becoming one of the ‘unicorns’.
Only in this way you can acquire the huge resources that the brand will need to continue growing, renewing its products, and reinventing itself constantly in order to confront a dynamic market.