Startup journey explained - idea to exit - complete guide.

Today we will discuss the milestones of a startup journey, e.g., seed stage, early stage, growth stage, exit stage, Series A, B, and C - you might have a general sense that these stages are indicative of progress. Still, where one stage ends and another begins, I think many people don't understand the specifics.

So first, we have the ideation stage, and pretty much all of us have been there at one point or another; the startup is just an idea at this point; maybe the founder or founders see this gap in the market, they think they might be able to fill it with a product or service, and that's the ideation stage in a nutshell.

Now, when ideas turn into actual planning, when the founders sit down and come up with a company name and start to map out a possible revenue model, and they come up with some milestones that they want to hit in the future, well, that stage is aptly called the planning stage.

Now things start to get a bit tougher during the third stage, called the commitment stage, which is where the founders have to stop talking and start doing. They sign a shareholder agreement, the company is formally registered, and most importantly, they start building an MVP, a minimum viable product.

Now all three of these stages actually fit into a larger funding stage, which only really applies to the startup planning to raise external capital; once that isn't, we call them bootstrapped startups. But for those planning on raising money from investors, this larger funding stage is called the pre-seed stage. Now investors in this stage can consist of the founders themselves, family, and friends; sometimes crowdfunding is an option, and occasionally angel investors.

The next stage a startup enters is called the validation stage. At this point, the MVP has already been built or is very close to being finished, and the startup has begun testing this MVP in the market; they're selling early versions of the product to consumers, or they're offering their service in a limited capacity, and they're collecting many data. The goal during this validation stage is to achieve product/market fit, and you will hear the term 'product-market fit' thrown around a lot in the startup world but in a nutshell, what it means is that the startup's product or service is generating much demand from customers.

Now that might seem a straightforward thing to do, but in reality, achieving product/market fit can be hard; what it boils down to at the end of the day is separating people from their money; you have to convince them that your product or service is worth paying for and yes, some startups do get lucky, and they stumble into product/market fit as soon as they launch their MVP, it sees a tremendous response from the public. Still, for many startups, the validation stage lasts way longer, and they may spend much time experimenting before achieving product/market fit.

Of course, experimentation costs money; building multiple prototypes for a consumer goods startup or adding and removing features in a software or internet startup requires huge financial resources. So this is where we move out of the pre-seed funding stage and into the seed stage, where you'll have angel investors coming on to provide guidance, support, connections, and capital to keep the startup afloat. Also, at this point, because the startup has an MVP now and they're generating some revenue, they can begin applying for grants, they might even be able to secure a loan, or if they're okay with selling equity, they might start to get some attention from micro VC firms, accelerators, and incubators.

Okay, now that I have finished explaining what a seed stage is, or the seed funding round, I can explain the next terms here, it's odd-one-out, and it isn't that every startup raises, but it has become popular in the last couple of years, and that is the Pre-Series A round. It sounds like a big deal because it has a 'Series-A' in the name, but, what this is, is a second seed round - in fact, you could replace the term Pre-Series A with Seed Round Number 2, and it would mean the same thing - it's a round raised by startups who are still searching for product/market fit, or they've found it. Still, they need a few more months to raise their Series A, but they don't have enough money in the bank to get there, so you can think of a Pre-Series A as a bit of a bridge round, giving the startup enough runway to make it from Seed to Series A funding.

Now the moment the startup achieves product/market fit, which again means that the market a startup is targeting is excited about and ready to pay for a startup's product or service, the moment that is achieved is the moment the startup leaves the validation stage. They enter into the growth stage, and the idea here, as the name suggests, is to grow. This stage can actually take a very long time, and by the time this stage is over, the startup will likely no longer be a startup; it will probably be a fully-fledged company; during the growth stage, a company will take their validated product or service, and they'll start selling as much as they can. The primary goal here is to increase revenue; that's the growth we're talking about: revenue growth. Now, revenue growth during the growth stage typically comes at a huge cost; it will usually increase as expenses increase, meaning that the company will either break even or lose money every quarter, so this is where the next few funding stages or series come in, to sustain those losses.

After seed-stage and possibly after raising a Pre-Series A round, a startup will usually raise a Series A round, which is the first of many funding rounds following the same naming structure, Series A, B, C, and on and on, Flipkart before it was acquired they'd made it up to their Series J round, so I don't know if there is an upper limit to the number of alphabets that you can tap onto the word 'Series' but coming back to Series A, what differentiates a 'Series A' from a seed round? A seed round is meant to be used by a startup to achieve product/market fit. This is building the foundation of the business. A Series A is meant to be used to chase growth and quickly construct the frame of the skyscraper that sits on top of the foundation built using the seed money. Now, as I mentioned earlier, the growth stage of a company can last a while, and sometimes this is by choice; maybe the company wants to grow their user-base before they start to monetize it massively, but sometimes this isn't by choice, sometimes a company genuinely isn't able to monetize their user base, they don't know how, and they keep growing. Still, eventually, investors will stop pouring capital into this kind of company, and it will quickly need to figure out how to become profitable or go out of business.

Now, where things go from here does vary from company to company, but there are two main possibilities: A growth stage company can go straight to the exit stage, or they can continue to the scaling stage, and let's talk about the scaling stage first. This is a stage where the company learns how to increase its revenue. At the same time, spending stays the same, so this eventually results in massive profits, which can be used to make the business bigger and better. Companies will still raise funds from investors here, usually at a Series C level and up, but the goal here isn't so much to survive as it is to accelerate the scaling process. From here, once again, there are two possibilities: the scaling stage startup can go straight to the exit stage, or they can continue to the establishing stage. And I'm going to leave the exit stage for the last because that is where the story ends. However, you can think of the establishing stage as a company's golden years - they're still kind of in that startup mentality, so the founders haven't left, and there's still a very clear thread linking the ideation stage to the establishing stage. The goal here during establishing stage is usually domination. The company is the market leader in multiple global markets and will continue to expand. Things are going so well that nobody wants the party to end. Like all good things, though, eventually, it does come to an end, and this is finally when we reach the exit stage. There are two ways this can play out: the company can 1. Go public, or 2. Be acquired by a larger company.