5 Stages to Startup Success

Startup success is measured by your ability to create a company, and then build it into an organization that scales -- ultimately leading to a liquidity event (exit) that is significant enough to make you and your investors very happy.

I've taken all that I've learned over the past decade in building Internet businesses and distilled them down into what I'm calling the 5 Stages to Startup success. During your journey, always remember that you are a shareholder first and foremost, and that the goal of a startup is not to remain a startup. Your goal is to transition the startup into a scalable enterprise and exit (cash out) when it makes the most sense for you and your shareholders.

When building your startup, remember and execute the 5 stages below:

Stage 1: Conceptualize

1. Identify a problem and how you will solve it.
2. Validate that there is a significant market that is willing and able to pay for your solution.
3. Identify and engage with potential stakeholders (initial customers, team, and investors)
4. Create the proper corporate structure (establish founders stock, a stock option plan, etc.).
5. Create a mockup, prototype or alpha version of your solution.
6. Raise seed capital (friends and family round) to sustain your organization through product launch.

Stage 2: Launch

1. Further develop your product based on feedback from potential customers (private beta)
  • - Establish minimal feature set
  • - Establish product usage and sales metrics
  • - Establish sales/marketing strategy
2. Set a launch date and work like hell to hit it
3. Recruit a board of advisors (brain trust) and incentivize them with stock options to open doors for you
4. Plan and coordinate your launch strategy (PR, launch event, press tour, etc.)
5. Launch with as much publicity as you can muster (news, blog posts, etc.)
6. Leverage launch hype to raise enough capital (Series A investment) to sustain operation for 12-18 months.

Stage 3: Iterate

1. Monitor initial product and sales metrics in the weeks following launch
2. Further refine product based on feedback from initial customers
  • - Improve existing features making them more user-friendly
  • - Add secondary feature set
3. Pivot and make changes to your product and sales strategy where necessary
4. Repeat steps 1-3 until you can demonstrate consistent and repeatable sales success

Stage 4: Scale

1. Get to cash-flow break-even (if possible) before you run out of capital; and/or
2. Raise more capital (Series B) to further scale your organization to capture market share (recommended)
3. Round out your management team with operators (process-oriented management professionals)
4. Develop sales and marketing processes with management so that new hires have a roadmap for success
5. Watch closely and monitor your company's growth and organizational metrics (for acceleration or decline)
6. If near-term exit or additional investment is desired, ramp up PR so that your company's growth successes are widely known

Stage 5: Exit

1. Wait for suitors (large industry incumbents) to approach (they will come if your success is known)
2. Form co-marketing partnerships with potential acquirers to enhance their interest (optional)
3. When one expresses significant interest, hire bankers to run a formal process to see if others are interested as well
4. Sell the company to the highest bidder with the best structured offer for you and your investors (cash is king)
5. Take a very long vacation, put some money away for safe keeping, then start another company - it's in your blood