Startup Development Stages & "Rules"
A startup goes throughout different stages over its life span. Startup Development Stages & "Rules" explains how startups evolve, where they can get financing at each stage and what is expected to get financing.
As mentioned before, a startup operates in UNCERTAINTY. So why would you invest a lot of time and money directly into something so uncertain? The answer is you don't, really. You conduct a series of experiments and validate at each stage. You start by formulating your most uncertain assumptions and validating them in the cheapest way possible at each stage and with real customers. Such an approach has multiple benefits:
You won't lose so much money because you've been choosing the cheapest way to confirm or disconfirm your hypothesis
You'll learn about your real customers so that you can develop an even better solution or even "pivot" your direction (A pivot is a change of your Business Model).
You'll better convince investors to invest, because for them investing in a startup is also a risk! So, they are looking for validation or traction as much as you do.
So how does a startup's development look like? Broadly speaking, a startup's development stages can be classified into four stages: Ideation, Prototype, MVP and Growth. The graph below explains what are the main activities of the founders and each stage, what validation is required, where the teams can look for financing and how much.
Let's have a deeper look on the startup ecosystem players such as Incubators, Accelerators, Angel investors and Venture Capital in the next section: Startup Ecosystem: Incubators, Accelerators, Investors..."