A Comprehensive Guide to the Start Up Stage

The start up stage is a critical period for any new business, where the foundation is laid for future growth and success. It's a time of intense activity, where entrepreneurs and founders work tirelessly to bring their vision to life.

During this stage, the initial product or service is developed, and a minimum viable product (MVP) is created to test the market and gather feedback. This MVP is often a simplified version of the final product, designed to validate the business idea and identify potential flaws.

A successful start up requires a solid business plan, which outlines the company's mission, goals, and financial projections. A well-crafted plan helps entrepreneurs stay focused and make informed decisions, even in the face of uncertainty.

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The startup stage is a crucial period for any business, and understanding its different phases can help you navigate the process with confidence.

At the pre-seed stage, you're still figuring out your idea and making its preliminary validation. This is the time to test your concept with a Minimum Viable Product (MVP) and gather feedback from users.

A product team can be a valuable asset during this stage, helping you save money by preventing unnecessary investments and time. By sharing your idea with people, you can find not only investors but also product experts who can guide you in the right direction.

Here are the different stages of startup funding:

Each stage of funding requires a clear plan for how the money will be used, and convincing investors that your startup is worth investing in.

The pre-seed startup stage starts when you find the idea you believe in and try to make others see it. This idea can come out of your own experience, like the co-founder of Nomad, who built a real estate platform after struggling to find an apartment on the chaotic Dubai market.

Your primary purpose in this stage is to make preliminary validation of your idea. To do this, you can validate hypotheses for customers, demand, and offering, as well as bring in key stakeholders to convert funding on the idea.

In the pre-seed phase, founders should also register key patents and trademarks to protect their intellectual property.

Conducting market research is an essential part of the startup timeline, and it's not just about competitors' analysis. You need to deliver attention to your potential user, understanding who they are, how they spend their time, and how you can make their lives better.

To determine if your product or service can be a viable solution to a real market problem, you should interview potential users and ask them a tone of questions to understand how they see the problem and solve it now.

It's common among co-founders to see their audience too broadly, but you need to be super specific about your targeted audience. For example, New Relic saw its target clients as Ruby on Rails developers and only gained popularity in this niche.

As a startup founder, you can't wear all the hats anymore. You have to lean on the right people, including startup mentors, to reach the next stage. Scaling a company is a highly strategic endeavor, and you need the right people in the right place.

Take a look at this: Startup Stages of Funding

The growth startup stage requires a product team to focus on the essential things. They can help you scale your product technically correct, automatize some operational processes, and help make your customers stay with you as long as possible by setting up a retention strategy.

You'll need to secure Series B and C investments to focus on growing your startup. More funding than before is essential to scale your business to a wider market and maintain long-term profitability. Venture capitalist firms are still at the forefront of your growth-fueling funding, but investment banks, private equity firms, and hedge funds might start to take interest in your company, too.

To master the growth stage, you need to scale your team and hire the right people. One major part of the growth stage is scaling your team, so you need the right people in the right place.

Here are some key roles you may need to fill:

You can also consider hiring startup mentors or other founders who have gone through the expansion phase themselves to help you navigate this stage.

At the seed stage of a startup, a prototype is a crucial step in visualizing how your product will work and confirming that you're on the right track.

A validated idea and proof of concept are essential before creating a prototype. This can be as simple as a paper sketch or a landing page to gauge interest.

A prototype can be a UX prototype to click through, a 3D model of a space before and after your product has been installed, or even a basic website to test the waters.

The goal of a prototype is to confirm that you're not far from the product-market fit, and it can be a game-changer for your startup.

Here are some essential elements to consider when developing a prototype:

By focusing on these key elements, you'll be well on your way to creating a prototype that will help you test and refine your product.

Scaling and growth are crucial aspects of a startup's journey. The growth stage is characterized by securing Series B and C investments to scale the business to a wider market and maintain long-term profitability.

At this stage, a company needs more funding than before to fuel growth. Venture capitalist firms are still at the forefront of providing funding, while investment banks, private equity firms, and hedge funds may also take interest.

Scaling a company is a highly strategic endeavor that requires careful planning to avoid burning through resources too quickly. As a founder, you can't wear all the hats anymore and need to lean on the right people, including startup mentors, to reach the next stage.

Here are the key action steps to focus on during the growth stage:

If your startup achieves 20% annual growth for three consecutive years, you're likely entering the expansion stage, where your goal is to expand further and become a "scaleup."

The growth stage is a critical time for startups, where securing Series B and C investments is key to scaling your business. This stage is all about focusing on growth, and it's essential to have the right strategy in place to achieve it.

At this stage, your product evolves and takes its niche on the market, with turnovers rising. You need to provide sustainable scaling of your product, find new customers, and ensure profits.

The growth startup stage is characterized by a focus on profits, and it's essential to keep improving your product to keep up with the scaling. This stage requires a lot of attention to detail, and you need to handle many more things and set up more metrics.

To master the growth stage, you need more funding than before to scale your business to a wider market and maintain long-term profitability. Venture capitalist firms are still at the forefront of your growth-fueling funding, and you may also attract investment from investment banks, private equity firms, and hedge funds.

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A key indicator that you're in the growth stage is if you've managed to grow more than 20% annually for three consecutive years (in billing or employee count). At this point, your startup becomes a "scaleup", according to the Scaleup Institute.

Here are some key action steps to focus on during the growth stage:

With the right strategy and funding, you can successfully navigate the growth stage and set your business up for long-term success.

An Initial Public Offering (IPO) is the final stage of a private corporation transitioning to a publicly traded company, where the company issues new stocks to the general public.

This funding stage provides a large amount of capital to continue achieving growth objectives and opens up the opportunity for the public to invest in the company and potentially earn a return on its investment.

Issuing an IPO is a complex and time-consuming process that requires following government regulations and preparing a detailed audit of the company's financial statements to provide transparency to potential investors.

Most companies that issue IPOs have a valuation of around $1 billion, making it a significant achievement.

For startup founders and early employees, an IPO is an opportunity to cash out and realize their investment in the company.

Issuing an IPO can be a major milestone for a company, often a sign of success that leads to increased visibility and credibility in the market.

Pre-seed rounds are a great way to start, as they open up more types of investors with smaller check sizes. Angel investors, accelerators/incubators, and dedicated VC funds are common investors in pre-seed rounds.

Angel investors can write checks ranging from a few thousand dollars to $500,000+ and are a common place to start for a pre-seed round. Accelerators/Incubators will often take place in tandem with a pre-seed or write follow-on checks after completing their program.

Dedicated VC funds have become a staple in the space, and more traditional and larger firms are also making their way into pre-seed rounds. Some popular active pre-seed stage investors include Hustle Fund, Forum Ventures, and Bessemer Venture Partners.

To track your startup's fundraise, consider using Visible, which can help you manage every stage of your fundraising pipeline. With Visible, you can find investors, track conversations, share pitch decks and monthly updates, and organize fundraising documents.

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The average amount of funding for startups can vary depending on the stage of their growth. Pre-seed rounds can range from $100,000 to $5 million.

For Series A funding, the average amount is $18.7 million, as of 2024. This amount can be a good starting point, but it's essential to justify your valuation thoroughly.

Series B funding typically exceeds $30 million, often used to grow the business further and improve upon it. The bulk of the heavy lifting has already been done by seed capital and Series A funding.

A Series C funding amount is generally between $30 and $100 million, with an average round of $50 million. At this stage, a startup's valuation is likely over $100 million.

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Angel investors are a common place to start for pre-seed rounds, and they can write checks ranging from a few thousand dollars to $500,000 or more.

Accelerators and incubators also invest in pre-seed rounds, and many programs will take place in tandem with a pre-seed or write follow-on checks to help fund the round.

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Dedicated VC funds have become a staple in the space, and more traditional and larger firms are also making their way into pre-seed rounds.

Some active pre-seed stage investors include Hustle Fund, Forum Ventures, and Bessemer Venture Partners, among others.

Here are a few notable pre-seed investors:

Tracking your fundraise is a crucial part of growing a successful startup. You can manage every stage of your fundraising pipeline with the right tools.

Visible is a platform that helps you find investors at the top of your funnel with its free investor database, Visible Connect. This database can be a game-changer for startups looking to expand their network.

To track your conversations and move them through your funnel, you can use Visible's Fundraising CRM. This tool helps you stay organized and focused on the most important conversations.

Sharing your pitch deck and monthly updates with potential investors is also a key part of the fundraising process. Visible makes it easy to share these documents and keep your investors informed.

Organizing and sharing your most vital fundraising documents with data rooms is another important task. Visible's data rooms help you keep everything in one place and make it easy to share with investors.

Here are some key types of investors to consider for your pre-seed round:

By understanding the different types of investors and the tools available to you, you can make informed decisions about your fundraise and set your startup up for success.

To avoid common mistakes, startups need a strong business plan in place. This is essential for securing funding from investors.

Not having a track record of success is a major red flag for investors. They want to see that a startup has achieved something before investing.

A large potential market is crucial for attracting funding. Without it, investors may not see the potential for growth.

Having a competitive advantage is vital for securing funding. Without it, a startup may struggle to stand out from the competition.

Startups need to demonstrate a strong business plan, track record of success, large potential market, high demand for their product or service, and competitive advantage before pitching for venture capital.

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