What is The Usual Life Cycle of a Startup?

Why should you read this article?

Every software startup company goes through MVP, product-market fit, idea discovery, etc. Founders should know the flow to plan their steps and know what to expect when building their startup. For many of them, who failed, the life cycle seemed like this:

1. Define the product hypothesis
2. Identify the feature set
3. Build the product
4. Release the product
5. Pray

However, to build a unicorn, you should pass several other stages, and we'll explore it now.
BTW, CGS-team helps early-stage startups succeed by leading them from the initial idea and custom software development to the first revenue and so on. We've already increased the revenue of LiveArtMarket by +300% via smart decisions and development.

What are the stages?

1. Idea
2. Product-market fit
3. MVP
4. Product-market fit, again
5. Launch
6. Growth
7. Maturity

Source: Cofferun​

We'll go through each of them more precisely.

• Idea

If you don't have an idea, you can check the video by YC school or use the shortlist method: find many different niches and create a longlist in a table format, then rate each niche, checking important factors (business model, tech feasibility, etc). Then create a shortlist of the best-rated niches, deep-dive into it, and make a very deep analysis of them. Check the competitors and decide what you can do better or what problem of the audience is left unsolved. 

Before you dive into your idea, there are a couple of important questions you should ask yourself. First off, what problem are you trying to solve? And secondly, do you think your solution will actually solve that problem? If you're feeling good about both answers, go ahead and start testing your idea. But if you're not totally sure, it might be worth taking a step back.

• Product-Market Fit

It's crucial to be sure of the product-market fit at the initial stages. However, you'll search for it while doing, releasing MVP, and all your way, actually. 

If you're trying to make it big in the market, you gotta make sure you're giving your customers what they want, reaching them through the right channels. Don't make the mistake of not checking if there's a market for your product, not getting to know your customers, or just focusing on your product without testing it out. There's a five-step plan that involves making a business model, checking if there's a market for your idea, talking to customers, developing your product, and getting new customers. Keep on improving based on feedback until you're doing pretty darn well, like 40% well.

You can use the "PMF" framework, 5 Steps to Product/Market Fit: 

Step 1: Business Modeling 

Step 2: Market Validation 

Step 3: Customer Interviews Step 

Step 4: Product Development & Customer Acquisition 

Step 5: Product Analytics

Source: Medium​

Check more about the framework here.

• MVP

Basically, it's a simple version of your idea with only the most important features. This way, you don't have to spend all your money upfront on a big, complicated project. Plus, you can always improve it later. Consider taking custom software development services to quickly create your MVP and qualitatively and test your hypothesis.

• Product market fit, again 

Product market fit doesn't end here. You should do the steps continuously to grow your business:

1. Test for product-market fit. Survey users to understand their feelings about your product.
2. Measure retention rates. Retention rates vary depending on the model and vertical, so determine what is considered good for your specific context.
3. Test for Language/Market Fit. Define your product's positioning in the market and target users. Conduct A/B tests to refine your messaging, including value propositions, taglines, descriptions, features, benefits, and calls to action.
4. Perform Funnel Optimization. Experiment with different elements, such as landing pages, calls-to-action, and onboarding processes. Identify the "Aha Moment" for users and streamline the path to reach it quickly.
5. Segment your audience. Target users who derive value from your product. Analyze the characteristics of users who stay versus those who churn.
6. Seek Channel-Product Fit. Discover the most effective channels for reaching your target customers. Study frameworks like the Bulls Eye Framework and Channel Prioritization Matrix for guidance. Focus on one or two top channels initially and conduct growth experiments to assess their potential.

• Launch

During this phase of startup development, the main focus is on launching the product and engaging in extensive brand promotion. The goals include:

1. considering legal issues like brand registration;
2. conducting thorough testing and optimization;
3. improving the product and the brand's reputation;
4. searching for potential investors.

• Scale

As a company progresses, the team must adapt to the direction of the business. At the scale stage your goals are:

1. Recruiting exceptional specialists.
2. Continuously searching for new markets, niches, and target audiences. 
3. Establishing a positive corporate culture.

• Maturity

When a company gets bigger, sometimes its growth slows down. But the big tech companies never stop trying to grow. They're always looking for new ways to expand, like buying other companies or going international. 

At such a stage mind this:

1. Consider exploring opportunities to expand your business overseas. To ensure the best possible experience for your customers in each new region, building teams that understand the local culture and can adapt your product accordingly is important.
2. Explore acquisition opportunities that complement your product. For example, consider acquiring a company that helps you reach a new group of users or enhance the value you offer to your current customers.
3. If you want to ensure the success of your growth team, you should always be willing to experiment with new growth channels. A great way to do this is by targeting users who still need to adopt your product. You can increase your chances of success by figuring out why they haven't and finding ways to reach out to them.
   

How do experts see the life cycle?

Once a startup gets past the "garage" phase, they all end up at the same spot: the PMF. That's short for Product-Market Fit, by the way. After that, they expand into different countries, channels, and products and become a growth machine. That's what Brian Balfour calls it, anyways. Finally, they either slow down independently (according to Morgan Brown) or get bought out (Steve Blank). Then they stabilize and become a legit business.

Source: OpenVC 

Conclusion

In conclusion, the life cycle of a startup typically includes several key stages: idea generation, product-market fit, MVP, launch, growth, and maturity. Founders must understand this flow in order to plan their steps and expectations effectively. 

I advise you to check the YC combinator library and Lenny Rachitsky newsletter. There you'll find insight, no matter at what stage you are.