Understanding The Stages Of A Startup

At JumpStart, we often get a lot of questions from the entrepreneurs that we work with about which specific business stage their startup fits into and what exactly that means for them.

Before we attempt to answer this question, we always start with the disclaimer that no two companies, or geographies, are exactly alike. Luckily though, there are a few key principles, which are pretty consistent no matter who or where you are.

Below, you’ll find the three of the most critical stages of a startup business, along with a few pointers to help you determine which one best describes where you are on your startup journey.

The Idea-Stage Startup
For many people, the idea-stage and the pre-seed stage tend to blend together, especially when it comes to funding.

Either way, this is the stage where you are still are honing in on understanding the “problem” in the market and framing how your idea is a unique solution to that problem. If words like customer discovery, market opportunity and minimum viable product (MVP) sound familiar to you, you’re most likely a pre-seed startup.

If you’re running an idea-stage startup, your primary concern is validation, i.e. the problem you are trying to solve really exists, your solution actually solves it and that it’s a big enough problem to motivate people to actually buy what you are selling.

The Seed-Stage Startup
This is the stage where you really start executing against your idea. You have a few customers or users, and you’re starting to generate a little bit of revenue, but haven’t yet been able to repeat your success over and over again.

The seed stage is where your sales/go-to-market strategy really has to start taking shape. You’ve validated your idea and proved that people are willing to pay for it. Now you develop the formula to go bigger.

The Early-Stage Startup
You’ll also hear funders call this the Series A or seed-plus stage.

By the time you get here, you are usually in full-on execution and growth mode. You’ll know you’ve hit this stage because you should have a repeatable sales model, an established go-to-market strategy and you’ll probably be looking for the big infusion of capital you need to ramp up spending and grow even faster.

The early-stage startup is right on the cusp of explosive growth. You’re now at the point where successful exit is no longer just a dream. Your staff starts to grow, more formal policies and procedures start take shape and you finally begin to envision a more stable business where strategies don’t pivot every single day.

Of course, these stages aren’t an exact science and there can be a lot of overlap. Some companies linger in the seed stage much longer than others. Some companies raise Series A funding without a single customer.  But for the most part, they are the exceptions that prove the rule.

Remember, different investors can also view stages differently – and different funds also invest in different stages (some focus only on idea-stage or seed-stage startups while others focus only on larger Series A investments). Be sure to do some of your own due diligence to show you understand the space these investors play in before you reach out. You can often start by looking at their other portfolio companies to get a sense for how you match up.

To learn more about JumpStart’s investing activity, check out our funding page.