The 4-Stage Lifecycle of a Tech Start-Up

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These days, it’s all about high-tech start-ups.  Every smart, ambitious young person aspires to build the next Facebook…and some will.  These aspiring entrepreneurs will follow what has become a clearly-identifiable, four-stage lifecycle as they take their companies from a back-of-the-napkin idea to a successful, $100 million or larger business.

Stage 1: Imagine
Getting to a minimum viable product

1In stage 1, it’s all about product development.  It’s in this stage that an agile and lean development approach is incredibly valuable as it promotes getting to a minimum viable product (MVP) quickly with a focus on the feature set that really captures the essence of the entrepreneur’s vision.

Defining the MVP is frequently nearly as hard as building it.  The process of building the MVP ensures that that the idea is constructable, that it is technically feasible to do.

Stage 2: Prove
Getting to $1 million

2With the MVP in hand, it’s time to move on to stage 2 where it’s all about establishing a business model by acquiring early adopters.  Early customers can provide the start-up the feedback it needs to validate and, more importantly, to prove that the product has value and a market.

Said another way, this stage is about proving that the business model is viable and that customers are realizing value from it for which they’re willing to pay.

Stage 3: Improve
Getting to $10 million

3With $1 million in revenue, it’s time to invest in improving the product to garner a broader range of customers who are likely demanding features well beyond what the MVP provides.

It’s all about the product again and, specifically, about understanding the market that the product is addressing.  It’s not uncommon for the start-up to still have rather ad hoc operations with staff wearing multiple hats and customer commitments addressed on a just-in-time basis :-).

Stage 4: Scale
Getting to $100 million and beyond

4It’s time to grow; while the product and its development are still important, it’s now time to give operations center stage.  To scale the business effectively and to go beyond the label of “start-up”, it’s critical that an operational focus take hold: scalaeble and repeatable processes for acquiring, on-boarding, and retaining both customers and employees.

As discussed in my article on the evolution of software companies, It’s in this stage that companies outgrow the “People Company” phase and enters the “Process-Focused Company” phase.

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