6 Life Cycle Stages of a Startup | Furlough Mastermind
Join us every Friday at 12pm EST in the Furlough Community Discord for our Mastermind session hosted by Joe Casanova & Ophir Gadot. Our guests change every week and range from experts, entrepreneurs and creatives to influencers, brands, nomads, investors and more!
In this session Joe Casanova and Ophir Gadot take the time to explain and simplify the 6 stages that a startup go through to come into fruition.
You can also watch the replay of the mastermind here:
Introduction of all life cycle stages of a startup
Ready? are we hyped?
In this session, we will be covering startup lifecycle stages. And no matter where you are as a business or an organization, you’re in some point at one of these six spots. Alright, so as you can see, with this live audience feeling the vibe, you have a bunch of emojis splattering everywhere. And that’s how excited we are to jump into this. And I guarantee you guys gonna leave away with some actionable advice
Max Marmer lifecycle model for startups by using the Startup Genome and Kauffman Foundation, as you said, early stage startups that are researching and marketing of working towards a working MVP, this is known as the discovery stage, okay, this is where the ideas are coming to life, everyone has to figure out what they want to do before they do it.
The second phase is when a startup has an MVP, but they’re really seeking validation towards said market fit. This is known as a validation stage, as you’re figuring out your idea, you need to validate said idea to make sure people want it, make sure it fits in the market and make sure you’re possibly solving a real world problem.
So once you have validation, and you seek market fit, of course, this is where you focus on the optimization, the flows and the workflows and those processes. Of course, you guys know the word, this is efficiency, okay, making sure that your company is operating at very seamlessly without problems.
After your efficiency, you refine those problems, and you focus on extensive growth, as you know what every marketer favorite word is to scale. Also scaling, right? This is the focus on growth. Now, once you have set growth as a legitimate business is established, now you can look towards processes to focus on maximizing their profits. So to be clear, the difference here between stage three and stage five, right, the efficiency stage, you’re focusing on improving optimal optimizing processes and workflows, versus where profit maximization, you’re more focused on dropping expenses, increasing revenues, and making the most out of money. So the the actual optimizing of processes is more focused on the profit side where the efficiency is more focused on the product side. All right.
And then last, definitely not least, it actually says begin expansion into new markets and territories, as well as horizontal and vertical expansions. And this is the renewal phase. And this is what you’re seeing with Disney, where they’re going ahead and doing acquisitions for Marvel and for Fox and then they launched Disney plus to go be a direct competitor for said, Netflix. This is, you know, Amazon, where they expand new markets and acquire CreateSpace, Kindle KDP. Audible and continuously do more acquisitions, because they want to go ahead and expand horizontally and in new verticals.
Stage one of a startup: Discovery
Let’s go ahead and jump into the first one. Right. So stage one, discovery, this is traditionally where you’re researching that market, the competitors, who your customer bases, okay, you’re designing that first iteration of the UX of what they do when they get to your site, what their experience is, what problem you’re solving the solution that says “fix problem”, which is the validation, and you really, truly build this MVP that you can go ahead and actually start taking and start showcasing to your ideal potential users, and actually solving said problems.
Stage two of a startup: Validation
After you go from discovery. Now we’re in the validation stage, okay. And said, validation stage, this is where you have the MVP, the MVP is launched, okay. But now, as you’re seeking validation, you’re going ahead and you’re working on trying to make sure that the customers enjoy it, that it’s actually fitting and solving real world problems. You’re constantly understanding, getting customer feedback, and improving the whole entire model that you’re using that problem and the solution fit. And this is where you’re refining product through new versions, version 1.0, version 1.2 3-4-5, so on and so forth. So to go back to a fear what you were saying about the business model that does fit in here, because this is where you’re validating and trying to improve the business model so that it works and everything is seamlessly going.
So real quick, actually, Alexandra asked, How long should you validate for and she says six months or so. That’s, I mean, one, I think I truly believe you’re always validating. But most importantly, you can validate in a moment, you know, you could validate in a day, five days in a year, and never end up validating, right? It’s, as long as you’re working out. You’re always seeking validation when it comes down to product fit.
But I don’t think you can trim it into a certain timeframe, but mostly get a sample that is bigger than a sample size, that the small sample size and what I mean like being a valuable input on what’s working and what’s not valuable rather than just jumping to conclusions. So six months could work. It depends on the product. It depends on the amount of beta testers and people involving in it and how much you’re engaging with it.
When it goes On a validation, just want to give you guys some insight on what validation looks like. And let’s say you’re thinking about releasing an ebook or an actual book as yourself as a brand of validation, we’ll be building a landing page that has signups and driving traffic to that signup, and you end up getting 1000 signups that means 1000, people are interested in that book, you just validated that idea of discovery.
Stage three of a startup: Efficiency
Now you got the validation, which leads to the next part, efficiency as you’ve already achieved, that product fit. This is where you start focusing on the next step, which is ultimately going to be scaling. So you’re preparing for that day, you’re improving, improving the user journey to make sure it’s able to handle the aggressive user growth at scale. So when you open up the floodgates and get 10 20 30,000 new people into in your model, none get dropped off. they all are experiencing that user experience and experiencing that product or whatever offer it is that your business is bringing to the table. Okay? So beyond that, optimizing the performance of the product to handle the said user growth, of course, because this is product side and user experience side, two sides of the same coin, right, and operational workflows and systems. So that basically, as the new influx of traffic and user base and anchor ease come into place, the customer service team, your administration team, whoever the support team is, is able to support it, and conducting validation tests with scaling strategies. All right. Any comments on the efficiency stage? Pretty straightforward, right? And it’s great, because, honestly, I think this is actually the phase that we’re in. Well, we just finished I think we finished as Furlough as an organization, you guys know, I love to use Furlough in this community and this project that we have here as a reference that we can all gain that experience. So I’m going to go back real quick, right? The discovery was, we’re really just kind of figuring things out. That’s how his community ended up. Once we sought validation with someone like Roslyn, and that testimonial, someone like Lori and that testimonial, someone like Bogdan who’s on, you know, opportunities and things that the credits because of his experience that for that validation was like, Alright, amazing. And then what we did was really focused on efficiency in the process.
Stage four of a startup: Growth
And right now, at the beginning of quarter four of 2021, a little bit over a year, since we founded this wonderful community, we were focusing on growth and on scaling. And a part of me is a little concerned to be honest with Furlough on scaling just in the last quarter, because I still think we need to refine efficiencies and process so we kind of are stage three, and I think we’re gonna really focus on scaling, come January quarter one, especially when you have you know, CPA cost (cost per acquisition) is going to be relatively high, because of all the competitors trying to bid in this space because of this e-commerce holiday shopping season. So in the scaling phase, you already have achieved your validation, you’ve achieved an acceptable level of operational systems and optimizations. And now you’re just pushing for that growth. And you’re constantly conducting validation, as I said earlier, and like validation, you’re always seeking validation. And even here, you’re constantly every phase, you should be seeking validation, except for discovery. And that way you keep repeating that sales process so that you make sure at scale, it’s still as effective as it was, you know, a smaller boutique size form.
Scaling is all relied on efficiency optimization that comes before. Meaning once I found those points that are working for me. And the effort of scaling is much more focused in place and helping the company grow rather than scaling actions that are not profitable, or scaling on actions that are not in favor of the business growth. So this is how those two are so much tied to one another. But the moment you start scaling, meaning that you already know what works, and you know how much you can gain from growing these channels.
Stage five of a startup: Profit Maximization
Beautiful, love it. And now that you’ve scaled, we focus on profit maximization. And that is successfully scaled the business you’re officially established company, which I mean, let’s be honest, you’re probably established company a little bit at the right after validation. But at this point, you have a ton of customers, you have a ton of users, you probably have a ton of employees, a bunch of processes and workflows, a bunch of hands in the pot, trying to make this thing happen. And really, you’re focused on expansion on the production and being able to service and potentially, you know, obviously, with that increased revenue, investing in back into your organization, we’re finding that everything that you have is a business and obviously when you’re at stage five, you’re going to have day to day hurdles and obstacles that just generally happen through business. But this is where that focuses and it’s really just making the most out of the profits.
So companies that go through a rapid growth like startups, what happens is the recruiting is not like on-point. They’re unable to find the perfect talents. They’re over hire. They overspend on software. He go 100 miles an hour in multiple directions. So there’s so much to clean up from employees, software processes, everything in between. This is the most important stage, because most startups scale in a position, they’re not profitable. This is the point where you actually get to that make it or break it as a business.
You know, just to add to what you said, I believe it was Ryan Holiday or Tim Ferriss, both are great. They said that have you ever guys ever actually been … baking a cake where you buy the ingredients, and then use like, follow the ingredients and put it in, quite simple and get stuff and ice cake, put the frosting on it. So one of them said, like, have you ever actually gotten two of them, and tried doubling the ingredients, and just following the instructions and pouring it, ultimately, you’ll see that your cake is not leveled, it’s not. It’s not flying, and it’s not cooked at the same temperature across the entire cake. And this is simply a metaphor for being able to scale and do too much, especially when you’re skipping, you know, stage three, which is actually the efficiency side of things. Because if you have that processes and systems in place in your operations, ultimately when you scale, those are going to be magnified. And you’re really going to see it especially when you get to this stage and the profit starts coming in, and your workflows and your systems are just not suiting your company, especially at this level of growth that you’ve experienced. So something to be aware of.
Stage six of a startup: Renewal
Last, but definitely not least, this is known as a renewal stage. And this is kind of where you’ve reached the peak profits, you’ve reached the peak level of optimizations for your users. And this is where you kind of want to be, you know, still relevant, right, you want to still be pushing the envelope. This is where it says that actively seeking to reinvent the company in the core products to stay innovated by launching new products, launching new lines. You know, this is a great example is what Apple did with the acquisition of Beats by Dre like they ended up buying a headphone company, so that they feel innovated and attack new markets and then actively seeking to acquire other companies and technologies to expand the market sharing relevancy. This happens. I mean, how many examples can you possibly be good with this case, right Ophir?
Its endless amount of examples. Like To me, the biggest example for that is Google, Google started at a search engine. And right now there is no place online, that you can find a product without Google. It just doesn’t exist anymore.
Yeah, They’re the front page of the internet.
There was always a question why Israeli companies never becomes unicorn. And this this changed over the last two years. But what it like most Israeli founders, were going on a on an exit route. Any getting to that stage five, optimize the company, and then sell it go on retirement. The differentiation between them is just that ability to get from point of dominance or strength within a certain niche and start pushing it on different verticals and on different depths within that market.
With that being said, I have a simple question to ask, is what stage are you? What stage is your startup is in the earlier stages? later stages? but is in the later stages Congratulations. It’s not an easy feat. And that is why you see statistics of how many startups quantifiably fail within the first four years. This is the type of stuff that we want to bring over to these mastermind sessions, to really bring in high level information and really just continuously build out this academy and build out the expertise within this community.