Every successful startup begins with a spark of inspiration, often igniting in the unlikeliest of places—a garage, a college dorm room, or a kitchen table. From these humble beginnings, entrepreneurs embark on an exhilarating journey that transforms their vision into reality. But what does it take to navigate the complex landscape of startup growth, and how can aspiring founders better understand the stages of this journey?

In this article, we'll explore the various startup lifecycle stage models that outline the transformative phases every startup undergoes, from inception to the coveted status of a unicorn. Whether you’re an entrepreneur plotting your course or an investor seeking to identify promising opportunities, understanding these stages is crucial. Join us as we dissect each phase, uncover key challenges, and highlight the pivotal moments that can make or break a startup's journey.

So, what is the typical journey of a successful startup? Four experts took a shot and tried to answer this question.

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The startup lifecycle according to Steve Blank

What do I do now, Steve Blank

Steve Blank's article deals with that gray area founders find themselves in which lies between being a nimble startup and being a large company with established procedures and processes. He outlines the search, build, and growth phases of companies.

Search - Finding a repeatable business model

In the search phase, the goal of a startup is to search for a repeatable and scalable business model. It requires flexibility as it takes multiple iterations and pivots to find a product market fit.

Companies have a "do what it takes" mentality to achieve success at this stage. They are rather small (less than forty people) and are most likely using funding from a seed round or Series A. Many startups fail to move onto the next stage and die here.

Build - Scaling up customers and headcount

Once a startup reaches this phase (and begins hiring more than forty people), the company must transform into one that can scale by growing their customers at a rate that allows for positive cash flow.

This phase begins with around forty employees and can last until the company has between 175-700. If the company is venture backed, this is where a Series C or D takes place.

The "do what it takes" mentality that worked so well in the previous phase becomes less effective and could be chaotic. The company needs to have things in place such as culture, training, product management, processes and procedures.

Grow - Setting up processes post-liquidity

In the final phase the company has achieved liquidity. This is the result of an IPO, the company having been bought or a merger. The company continues to grow and has repeatable processes. The Key Performance Indicators (KPIs) processes and procedures from the previous phase are now commonplace.

The startup lifecycle according to Morgan Brown

5 phases of the startup lifecycle, Morgan Brown

Morgan Brown defines the five phases of the startup life cycle as problem solution fit, MVP, product market fit, scale, and maturity.

Problem-Solution Fit

What problem does this product or service attempt to solve? Does the solution effectively solve it? If there is a clear answer and a yes to these questions, then founders have a hypothesis to test. This is the stage where the founder needs to do heavy market research and talk to target users, asking them questions in an attempt to find their pain points. This will provide enough information to build a viable MVP.

Minimum Viable Product

This is the stage where you build a viable MVP using the smallest amount of time and capital in order to prove demand and test customer behavior. Once it is released, it is all about finding initial users and seeing whether they remain with the product or abandon it.

Product-Market Fit

The MVP has gained traction and you are iterating from customer feedback. There may be paying customers and repeat customers. This is often a sign that there is product market fit. At this stage, founders should measure retention rates while surveying users to see how they feel about the product. The channels that are providing users should also be experimented with and explored.

Scale

This is where you double down on the channels that work. Growth experts are hired and given budgets and support. You build a growth playbook (the processes that define and grow the company) for each channel.

Maturity

As the company matures, growth slows, but it doesn't stop. Even Facebook and LinkedIn continue to expand and grow. New channels should be discovered and pockets of new possible users should be approached. At this stage, you look to expand aboard. This is also the stage where acquisition opportunities come into play.

This chart has all five stages illustrated.

The startup lifecycle according to Brian Balfour

Traction vs Growth, Brian Balfour

Brian Balfour argues that a startup goes through three phases of growing. These are traction, transition, and growth.

Traction

The majority of startups are in this phase.

The goal in this phase is for the company to find their product market fit. The most important metric is retention at this phase. The company needs a steady stream of users while the company experiments with a few channels to keep that flow of users coming in.

The team at this stage is usually the founder with the part time support of a designer or developer.

Transition

The transition phase is where the foundation of a process, team, and tools are built so growth can increase.

The goal in this phase is for the startup to identify, define, and understand the growth levers for the business. The most important metric to start tracking is growth rate on either a weekly or monthly basis. The growth rate will be what guides the company going forward. The company needs to increase the stream of users and focus on the one key channel that works.

The team at this stage should be a dedicated growth team with one leader (the VP or growth or PM) and a designer or developer.

Growth

The growth phase is where the company kicks it up a notch. The goal is to focus on growth levers and take them to the next level. The metric during this phase is the growth rate and the payback period. The payback period usually increases as a company grows. The channels become competitive (and saturated) and the capital restraints of the company loosen up.

The stream of users needs to be turned into a firehouse at this phase. This is also the phase where new channels can be opened up (as the primary channel could be saturated at this point).

The team at this stage is expanded with one growth executive leading the charge and multiple growth PMs who have their own team of a developer, designer, data, and channel specific talent.

The startup lifecycle according to Reid Hoffman

Blitzscaling, Reid Hoffman

Reid Hoffman defines blitzscaling as "what you do when you need to grow really, really quickly. It’s the science and art of rapidly building out a company to serve a large and usually global market, with the goal of becoming the first mover at scale."

Focusing on scaling an organization is paramount as an organization’s size and its ability to execute determine whether it can capture customers and revenue. He breaks this down by family, tribe, village, city, and nation.

Family

At the family scale, the company is raising money and still figuring out their offering. They most likely have not launched a product yet. Employee numbers are in the single digits.

Tribe

At the tribe scale, the startup is just starting to become a real company. Some version of the product or service has been launched and the target market has been identified. Blitzscaling could begin here if there is a runaway hit of a product or service. Otherwise, there are still uncertainties that the company can scale massively. Employee numbers are in the tens.

Village

The blitzscaling process usually begins between the tribe and the village scale. At this point, competitors and new entrants attempt to enter the space. The company has to have an edge that distinguishes them from other competitors who most likely are following conventional wisdom. Employee numbers are in the hundreds.

City

In going from village to city, specialization at all levels becomes more important. Companies need to know how to run entire departments and deploy capital for marketing. Key KPIs need to be established and followed. Reliability needs to be higher and what worked at the village level may not work here. Companies at this scale have one central revenue stream but may have more than one product. Companies also go global in the city scale. Employee numbers are in the thousands.

Nation

The nation scale is when the company is truly global. Users may be in the millions or tens of millions and spread across the world. The company may be in multiple geographies and have more employees outside of its home country than within. Employee numbers are ten thousand or more.

Putting the startup lifecycle together

The illustration below sums up the startup lifecycle according to each of these authors.

After the obligatory “garage” phase, all models converge to a single common point: the PMF, or Product-Market Fit. Then the startup gradually expands into several channels, several countries, and several products, and becomes a scale-up, or growth machine in the words of Brian Balfour. Eventually, the last stage is a stabilization of the startup, because of the growth slowing down (Morgan Brown) and/or because of a liquidity event (Steve Blank).

Funding strategies for every stage of the startup lifecycle

Funding is one of the most critical factors in the success of a startup. However, not all funding sources fit every stage of the journey. As startups evolve from idea to growth, their capital needs and investor expectations shift. In this section, we’ll explore the types of funding available for each phase, best practices for pitching to investors, and alternative funding options beyond traditional venture capital.

For more information on company stages, check out our blog discussing the various funding rounds from pre-seed to IPO.

Overview of Funding Types by Stage

Pre-Seed Funding
- What it is: The earliest funding round, often raised when the startup is still an idea or prototype.
- Funding sources: Founders’ savings, family and friends, angel investors, startup accelerators, and grants.
- Purpose: Funds are typically used to develop a prototype, conduct market research, or validate the idea.
Seed Funding
- What it is: The first official funding round, usually after the concept has been validated.
- Funding sources: Angel investors, micro VCs, early-stage venture capital funds, and crowdfunding platforms.
- Purpose: Seed capital is used to build a minimum viable product (MVP), acquire initial customers, and prepare for scaling.
Series A Funding
- What it is: The first major round of venture capital funding, meant to scale a product and grow operations.
- Funding sources: Venture capital firms, strategic investors, and corporate VCs.
- Purpose: Series A capital typically funds marketing efforts, product development, and key hires.
Series B and Beyond
- What it is: Later-stage funding rounds that support rapid scaling and market expansion.
- Funding sources: Large venture capital firms, private equity investors, and institutional investors.
- Purpose: These funds are often used to expand into new markets, launch additional products, or make acquisitions.
IPO or Acquisition
- What it is: Once a startup has matured, it may either go public through an Initial Public Offering (IPO) or be acquired by a larger company.
- Funding sources: Public markets or acquirers in the industry.
- Purpose: To provide liquidity to investors and founders, and secure capital for continued growth.

Closing Thoughts

Funding (and company growth) is not a one-size-fits-all journey. Each stage of the startup lifecycle requires a unique strategy, and choosing the right type of funding at the right time is crucial for sustainable growth. Whether you pursue traditional venture capital, bootstrap your way to profitability, or explore alternative financing, the key is to align your funding approach with your business goals and long-term vision. With the right mix of capital and strategy, your startup can successfully move through each stage—from garage to unicorn.