There’s plenty of uncertainty when talking about funding and startup stages: What defines a growth stage startup as opposed to an early stage one? Do Series A rounds coincide with growth stage startups? How do we know if a company has graduated from one stage of the lifecycle to another?
Here, we take a quick look at three popular models that’s been bandied about: Funding stages (which venture capitalists talk about often), Steve Blank’s Customer Developmental Model, and Startup Genome’s Marmer Stages, a new entrant which adapts Steve Blank’s model and modifies it with self-reported data from thousands of startups.
Marmer Stages
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Customer Developmental
Model
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Funding Stages
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- Named after Startup Genome founder Max Marmer
- Based loosely on Customer Developmental Model, but product-centric
- Goals and activities drawn from self-reported data by thousands of startups worldwide
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- Developed by Steve Blank in his book Four Steps to the Epiphany
- Focuses on understanding customers’ needs
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- Explains how funding at each stage can meet a startup’s needs.
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| DISCOVERY (5-7 MONTHS) |
CUSTOMER DISCOVERY |
SEED/ANGEL ROUND |
Goal:
Validate whether you are solving a meaningful problem and whether anybody would hypothetically be interested in your solution.
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Goal:
Discover whether the problem, product and customer hypotheses in your business plan are correct.
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Goal:
Ensure you have enough money to build version one of the software and raise the next round of capital.
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Activities:
- Founding team is formed
- Many customer interviews are conducted
- Value proposition is found
- Minimally viable products are created
- Team joins an accelerator or incubator
- First mentors and advisors come on board.
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Activities:
- Get outside the building in order to learn what the high-value customer problems are.
- Find out what it is about your product that solves these problems
- Discover who specifically are your customer and users
- With your findings, shape how you will describe your unique differences to potential customers
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Activities:
- Set up the company and fund living expenses
- Write a skeleton business plan addressing the five fundamental questions:
1. what you’re going to do
2. why users need it
3. how large the market is
4. how you’ll make money
5. who your competitors are and why this company is going to beat them
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EARLY STAGE |
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Goal:
Show some traction and possibly generate revenue
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| VALIDATION (3-5 MONTHS) |
CUSTOMER VALIDATION |
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Goal:
Get early validation that people are interested in your product through the exchange of money or attention.
Activities:
- Refinement of core features
- Initial user growth
- Metrics and analytics implementation
- First key hires
- Pivots (if necessary)
- First paying customers
- Product market fit
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Goal:
Build a repeatable sales road map for the sales and marketing teams that will follow later.
Activities:
- Prepare sales materials, marketing strategies, sales roadmap
- Land a few deals with “earlyvangelists”
- Develop positioning statement to influence how the market perceives your product
- If, and only if, you find a group of repeatable customers with a repeatable sales process, and then find that those customers yield a profitable business model, do you move to the next step.
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Activities:
- Turn prototype into something releaseable to the public
- Have solid core features ready
- Gain a small but devoted following
- Start generating revenue
- Formulate an exit strategy — go public or exit.
- Pay investors who will help the company in some way by letting them invest at low valuations.
- Use other investors as leverage to prevent funding delays. Pursue alternatives.
- Hire first employee and freelancers/part-timers/interns
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| EFFICIENCY (5-6 MONTHS) |
CUSTOMER CREATION |
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Goal:
Refine your business model and improve the efficiency of your customer acquisition process. Efficiently acquire customers in order to avoid scaling with a leaky bucket.
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Goal:
Build on the success the company has had in its initial sales.
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Activities:
- Value proposition refined
- User experienced overhauled
- Conversion funnel optimized
- Viral growth achieved
- Repeatable sales process and/or scalable customer acquisition channels found
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Activities:
- Create end-user demand and drive that demand into the company’s sales channel.
- Heavy marketing spending after the point where a startup acquires its first customers.
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| SCALE (7-9 MONTHS) |
COMPANY BUILDING |
SERIES A ROUND & BEYOND/GROWTH STAGE |
Goal:
Step on the gas pedal and try to drive growth very aggressively.
Activities:
- Massive customer acquisition
- Back-end scalability improvements
- First executive hires
- Process implementation
- Establishment of departments
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Goal:
Exploit the company’s early market success.
Activities:
- Transition from informal, learning and discovery-oriented Customer Development team into formal departments with VPs of Sales, Marketing and Business Development. These executives now focus on building mission-oriented departments.
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Goal:
Go from revenue to profit. Grow aggressively.
Activities:
- Spend more on marketing
- Build infrastructure
- Hire executives
- Down-rounds can occur to struggling startups
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LATE STAGE |
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Goal:
Go from profit to exit/IPO.
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| Source: Startup Compass Blog |
Source: Four Steps to the Epiphany |
Sources: Paul Graham’s blog, Meng Wong’s Map of the Money |
Notes:
1. This comparison is not meant to go into the details. It is aimed at giving an overview.
2. As is always the case with the real world, there are exceptions to the norm. Some startups, for example, may choose to eschew venture funding.
3. Investment quantum varies across geographies. Seed funding and venture rounds in Silicon Valley are typically larger than those in Asia. For example, YCombinator company ZenPayroll raised USD6.1M in seed funding in December 2012.
Image credit: Torley
The first Australian startup ecosystem report, a collaboration between Startup Genome, Pollenizer, and Deloitte Private, was released yesterday. Involving data from over 1,000 startups, the report, titled ‘Silicon Beach — Building Momentum’, provides a snapshot of Australia’s startup ecosystems.
What the data indicates is that while the entrepreneurial spirit is alive and well, Australia’s entrepreneurs don’t have the support they need yet to take their startups to the next level. Read more
The latest Startup Genome report, which ranks startup ecosystems around the world, released a deluge of numbers, facts, and statistics. But what do they actually mean for entrepreneurs belonging to the cities involved?
In Singapore’s case, the report could validate an observation that has often been made about the country: While there is plenty of startup money from the government and private sector sloshing around, dealflow has not been as forthcoming.
So unless there is drastic improvement, Singapore’s innovation output, relative to its investments, will continue to underperform. Think of it as a major infrastructural project — perhaps a highway — that becomes underused and hence a massive waste of money.
Read more
The Startup Genome, a company that aims to transform tech entrepreneurship from a gut-driven into a data-driven endeavor, has today released its global ranking of top 20 startup ecosystems in a research report. Representing Asia is Singapore (17th) and Bangalore (19th), who are the the only ecosystems from Asia in the top 20. Australia fared well, with Sydney (12th) and Melbourne (18th) making the shortlist.
This version of the rankings is updated from the one that was released in April this year, which included less variables and didn’t account for population size. Read more
The latest Startup Genome rankings are compiled using 40 variables and 8 indices. Read on for an explanation of what these indices mean. The table is interactive, so feel free to click around.
Read more
Startup Genome, an organization on a mission to encourage data-driven decision-making to entrepreneurs, has introduced a new tool aimed at investors.
Investor Compass is a follow-up to Startup Compass, which launched last August to help entrepreneurs avoid making mistakes about scaling their businesses. It uses data from 3,200 high-growth tech startups, and now has a user base of over 17,000 companies.
The new tool complements Startup Compass by visualizing data from companies that are already using the latter. Angel investors and venture capitalists can use Investor Compass to track how their portfolio companies are doing, based on comparisons with key performance indicators. Read more
Singapore is the top Asian startup ecosystem and 7th overall in the world, a just-released global ranking of the world’s top 25 ecosystems revealed.
The ranking is compiled by Startup Genome, a research project on tech entrepreneurship around the world.
Ranked according to “average throughput”, the only other Asian cities in the list of the top 25 are Bangalore at 9th and Mumbai at 20th. Sydney and Melbourne come in at 21st and 22nd respectively. Read more
Filed under Innovation & Technology, News, Technology, WebTags: bangalore, melbourne, mumbai, santiago, Silicon Valley, Singapore, Startup Genome, startup genome project, sydney
When you want to map something like the “startup genome”, you know you need more than just your four co-working founder friends – you need an army of people and organisations who work with startups to make it happen. Enter the seed accelerator, Blackbox. Co-founded by techVenture, StartupSchool, and FoundersFirst, Blackbox’s extended team has a track record of working with 100+ startups, including 15 exits such as Bebo, Tapulous and Lala. Now, having profiled more than 650 web startups, Blackbox has released its first Startup Genome Report. It is the first major step toward cracking the innovation code and in their words, “spreading the magic of Silicon Valley to the rest of the world”. Read more
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