Fred Wilson of Union Square Ventures says startups are like climbing up a flight of stairs and it is a essentially a five step process.  

  1. The first step you need to climb is building a product, getting it into the market, and finding product market fit.  [Seed financing stage]
  2. The second step you need to climb is to hire a small team that can help you operate and grow the business you have now birthed by virtue of finding product market fit. [Series A stage]
  3. The third step you need to climb is to scale that team and ramp revenues and take the market. [Series B stage]
  4. The fourth step you need to climb is to get to profitability so that your cash flow after all expenses can sustain and grow the business. [Series C stage]
  5. The fifth step is generating liquidity for you, your team, and your investors. [IPO or the Secondary Stage]

That is also a good way for  founders and chief executives to create an honest to go report card about the success or lack of success of their operations. I highly recommend you read the full post.

Photo: Stone Steps by Tim Ellis, on Flickr under Creative Commons.

3 thoughts on “5 steps of a startup”

  1. I have trust issues/fears about employees. I guess it’s the age old problem of wanting to do everything myself. Waiting for your article on that subject 😉

  2. @om Given the influence both @fredwilson and you have, its important to point out that there’s a world of startups (in India certainly, US and elsewhere) that grow without any venture funding. The stages of a startup, what @nenindia terms as the entrepreneur lifecycle are certainly along the lines of what Fred & you’ve outlined – however such an articulation in funding terms makes these IMO an unnaturally large part of how most startups grow. Funding is an input and often comes in as debt and other forms (customers, accruals) – so it might be bit fairer to articulate these in company stage milestones terms.

    #1 Product market fit -> #2 paying customers -> #3 growing team ->
    #4 breakeven -> #5 growth -> exit or sustained and growing profits

  3. After studying the startup process in a few different ways, it is safe to say that you want to have a pretty strong team initially as well; their diversity in the brainstorming process during your search for the product-market fit is invaluable. You may also want to have your exit strategy and growth plan available early on if you are seeking VC funding. Thinking of the process in steps is an apt way to approach it, however. 🙂

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