You can use this framework to enable startup stakeholders establish a common understanding of the current status of the startup, which stage it is in (pre-seed, seed, or Series-A), and the next milestones in its evolution. This framework is not intended to be a cast-in-concrete structure for every single situation.  The start-up stakeholders may adapt this to their specific situation.

Version 2 of the framework includes:

• An illustration of how to complete the framework.
• A description of why it is critical to have documented interviews of potential customers.

The simplest way to use the framework is:

• Go through the framework, component by component.
• Clearly and simply describe where the startup and place the description in the appropriate stage.
• Outline the key milestone, to get to the next stage and identify who is accountable for each milestone.
• State any critical issues.

The facts and assumptions you assemble will feed into the startup’s monthly cash flow forecast.

The framework reflects technology enabled services startups intended to grow into businesses with a valuation of at least $100 million. You can adapt this to other situations. This framework does not address fundraising.

You can download the complete template from my website:

What is the status of your startup (V2)

The column headings refer to where the startup is at the beginning of that stage. The following is the defined framework.  You will use this to position your company, state the future milestones and outline any critical issues.

Component	Pre-seed	Seed	Series A
Product/Service	Idea	MVP (Minimum Viable Product) – A product or service with just enough features to have satisfied early customers, and to have obtained customer feedback for future development.	MVP has been revised until market/product fit is proven. Product/service ready to scale.
Value proposition: This is the customers perception.  What are all the benefits achieved (financial and non-financial) achieved by the customers?  What are all the costs incurred by the customer (purchase costs, costs to switch to your company, other adoption costs, ongoing costs)?	Not validated with customers.	Customers have validated the value proposition. Have documented experience with customers to prove satisfaction with MVP.  Alpha launch completed and customers in place for Beta launch.	Completed Beta launch. Start to grow, month by month.
Revenue	0$ to < $5K/month	>$5k/month	>$100k/month
Market Traction -Customer/Revenue growth	None. Might be a pilot customer.	Starting to generate revenue, increasing month by month	6+ months of 10% growth per month
Distribution channels i.e. how are you going to get it into the customers hands.	None	Initial identification and discussion with distribution channels.	Distribution channels in place, with low volume.
Profitable?	No	No	No.  May be profitable 18-36 months in the future
Scalable?	No	No	Technology enables scaling at low marginal cost. Processes in place to enable growing talent.
Intellectual property	Maybe	Maybe	Must have legal or other protection in place
Co-Founders team	1-4 co-founders, could be part time.	2-4 full time co-founders	2-4 full time co-founders
Overall team	Co-Founders with relevant skills and experience.	Co-founders + 1-5 people with relevant skills and experience?	Co-founders plus 5-20 people with relevant skills and experience.
How long until run out of money	Personal cash flow plus friends and family will sustain co-founders.	6-18 months	6-18 months
Advisory board, with regular communications processes in place.	1-2 industry credible experts	3-6 successful entrepreneurs, industry experts	6+ successful entrepreneurs, investors, industry experts
Board of Directors	None	1-2 co-founders	1-2 co-founders, 1 successful entrepreneur, prominent investor or industry leader
Corporate governance: decision making, etc.	Informal	Clear decision-making roles. Incorporation results in legal, financial, reporting requirements and policies.	Decision making roles clear for investors, shareholders, board, and management. Having employees drives requirement for talent policies and processes.
Is the business viable	Unknown	Unknown	Yes. The question is, can the business scale successfully?
Source of funds	Personal, family, friend, fans, incubators, accelerators, government	Angel investors, lead investor.	Investors with deep pockets who can fund future rounds. Startup debt providers.
Financial ask	<$50K – $250K	$500K – $2 million	$2 million to $10 million
Market place communications	Little or none	Website, newsletter, and social media begun.	Enhanced website, newsletter, and social media processes.
Investor engagement and relationship management	Little or none	Defined the characteristics of target investors and investor introduction approach.	CRM technology and processes in place to manage investor and investor ecosystem relationships.
Cash Flow Forecast	Likely none	Monthly cash flow forecast and tracking.	Monthly cash flow forecast and tracking.  Ties to key milestones.
Financial and operational metrics	Likely none	Know what the metrics should be. Initial targets set.	6+ months historical reporting of financial and operational metrics.

 

The management team relationships, and roles of the CEO/founder(s), shareholders, investors, and board of directors rapidly change in a successfully scaling startup. Who makes what decisions is rapidly changing.  A lack of clarity and common understanding of who makes what decisions and is accountable for what results can cause confusion, and slow down or prevent scaling.

The purpose of this article (supported by a one-page slide) is to provide a framework, process, and facts to enable discussion and action planning among owners/shareholders, boards of directors, CEOs, and advisory boards. There is no one-size-fits-all answer.  The approach and action plan will be unique to the specific situation of each corporation.

The CEO/Founder(s) may be in the most complex situation: shareholder(s) without investing capital, on the board of directors, and part of management.

Investors need to be clear on governance, their role and accountability before they invest.  Some decisions are reserved for the shareholders and outlined in the shareholders agreement.  The founder(s) may have special voting rights.  Some decisions are made by the board of directors. Therefore, the decisions made by the board, board composition, director nomination process, and board voting need to be clear.  The CEO can make all decisions, subject to those reserved for shareholders and the board.  The CEO must also manage the communications and ensure there is broad awareness of planned decisions and results.

A successfully scaling startup goes through many governance stages, based on the size of the company.

Less that 10 employees.  This is a shared experience with everyone in the team involved with everything.  The CEO/founder is involved in most decisions.  The board is involved in detail and driving after-the-fact documentation of policies.

More than 10 employees.  The team is starting to have clear decision-making roles and accountabilities for individuals.  Everyone is not involved in everything.  The CEO/founder is no longer involved in most decisions.

The board continues to be is involved in detail and driving after-the-fact documentation of policies.

More than 50 employees.  There needs to be a layer of management. The board continues to be is involved in detail and driving after-the-fact documentation of policies.

More than 100 employees.  The CEO is architecting the business.  What got the company to this point is not what will get it to the future.  The board role changes in alignment with the CEO’s changing role. The board is no longer involved in the detail. Staff is driving documentation of policies.  Board talent requirements change but director changes may be constrained by the shareholders agreement.

More than 200 employees.  There is more than one level of management. The CEO is focused on talent (acquisition, retention, development, and allocation) and organization design.  The CEO proactively over-communicates vision and values, while also sharing employee and customer experiences.

Conclusion

The management team relationships, and roles of the CEO/founder(s), shareholders, investors, and board of directors rapidly change in a successfully scaling startup. Who makes what decisions is rapidly changing.  A lack of clarity and common understanding of who makes what decisions and is accountable for what results can cause confusion, and slow down or prevent scaling.

Your next steps

To enable discussion with your board of directors, CEO, and advisory board download the following one-page slide:

Why is governance essential for successfully scaling startups?

Your action plan:

• Select investors with the talent to enable scaling.
• Select a director or advisory board member who can coach governance.
• The CEO/founder needs to regularly communicate who is making what decisions, based on the vision and values.
• The CEO/founder must manage the stress and resistance which arise because: some people will no longer be involved in certain decisions; people will be making decisions they have never made before.