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What does the startup journey look like?
The purpose of this article is to outline the major milestones in the growth of a software startup. Almost every startup will fail. The time and money invested by the founders will be lost.
Phase 1 Build something that solves the urgent problems of a large number of customers.
The CEO is focused on finding and understanding a small group of people who love the great solution developed for their problems.
Founders, friends, and family initially finance the company.
- The CEO is involved in every part of understanding the customer problems and developing the solution.
- The founders have an idea. There are at least two founders. The CTO (Chief Technology Officer) is the primary or sole colder.
- Founders gain an understanding of their target customers, their urgent problems, and the value to them of solving their problems. The founders may interview up to 300 potential customers.
- Define the business model canvas. The business model canvas describes the value the startup offers its customers and illustrates the capabilities and resources required to create, market, and deliver this value and to generate profitable, sustainable revenue streams.
- The business model canvas is a set of assumptions and facts, which are constantly being validated, invalidated, and enhanced. The canvas changes at every stage of startup journey – sometimes changing daily.
- The canvas is basis for creating: various implementation plans, marketing & sales presentations, and investor presentations.
- Build a working prototype, which solves a subset of the problems for a subset of the customers.
Some people and organizations may invest at this pre-revenue point.
- Keep piloting and revising the prototype until the subset of customers are delighted with the prototype and are willing to recommend it.
- Achieve a MVP (Minimum Viable Product). Customers are paying for this solution which solved a subset of their problems.
Angel investors and seed funds may invest at this point
- Keep adding functionality to the MVP, until the founders believe the solution solves the problems of a large number of customers.
Phase 2 Build a company to sell the solution and enable a large number of customers to achieve benefits from the solution.
Venture capitalists may invest several million dollars. Most of the startups will lose the venture capitalist’s money.
- The CEO’s focus shifts to building the company.
- Prepare to scale.
Capital continues to be invested to fund the companies growth.
There are three things only the CEO can do, and no one else in the company:
- Create and maintain alignment of people with the purpose of the company;
- Nurture the company’s values, morals, and ethics (often referred to as culture);
- Hire the leadership team and ensure they work well together. Up to 50% of the CEO’s time will go hiring and managing the leadership team. At least 1/3 of the leadership team hires will not work out and must be fired.
Much of the CEOs work from Phase 1 will be delegated. The CTO does little or no coding, while leading at team of 10+ people.
Phase 3 Exit
A financial exit will take from 7 to 15 years. Few of the founding CEOs will be the CEO at the exit time.
The financial exist may involve:
- Sale to a strategic buyer; or
- Sale to a long-term investment fund.