What Stage Does Your Startup Fall Into?

Before securing funding and kickstarting your startup, it’s important that you identify the different stages of startups in order to make strategic moves and plan for the challenges ahead.

In this article we will be focusing on the case of early stage vs mid-stage tech startups; the differences, the structure and the funding evolution.

You might already be aware of the failure rate of startups, but it’s also critical that you identify the stages where failures happen or at least an idea to avoid repeating the same mistakes.

 

Content

• What are the Different Stages of Startups?
• The Early Stage Tech Startups
• The Mid-Stage Tech Startups
• Early Stage vs Mid-Stage Tech Startups?
• How do Funding Strategies Evolve from Early to Mid-Stage Startups?
• The RocketDevs Advantage

 

What are the Different Stages of Startups?

Wondering about the difference between early stage vs mid-stage tech startups? You have to first understand the various stages of a startup. The 6 stages of a startup include:

1. Pre-Seed Stage (Idea Stage)
2. Seed Stage (Validation Stage)
3. Early stage (Startup Stage)
4. Growth Stage (Mid-Stage)
5. Expansion Stage (Scale-up Stage)
6. Exit Stage (Maturity Stage)

 

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1. Pre-Seed Stage (Idea Stage)

Before we compare early stage vs mid-stage tech startups, let’s start with the pre-seed stage. The pre-seed stage, which is popularly known as the “idea stage,” is the starting point of most startups. This is where founders get the chance to develop their idea into an actual business concept.

The resources of this stage are usually limited and funding usually comes from personal savings or personal connections.

 

2. Seed Stage (Validation Stage)

Also known as the validation stage, the seed stage is where the founder works to prove how viable the idea is. This stage is all about establishing a rock-solid product-market fit and gaining awareness and traction.

 

3. Early Stage (Startup Stage)

If you’ve gotten to this stage, congratulations, your business has begun the process of “being stable” and having a growing customer base.

With initial traction in place, startups usually seek out Series A funding to expand operations and build infrastructure. Series A usually comes from venture capital financing.

 

4. Growth Stage (Mid-Stage)

In the context of early and mid-stage tech startups, the growth stage is popularly known as the mid-stage because it’s between early momentum and large-scale expansion. Operational efficiency and growth become part of the key challenges to overcome.

When a startup gets to this point, the startup has achieved product-market fit and is scaling operations. This is where Series B or Series C funding comes in.

 

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5. Expansion Stage (Scale-Up Stage)

The expansion stage is the transition that goes through from being a startup to a fully developed organization, which explains why this stage is known as the scale-up stage.

The focus is now on market dominance, profits and introduction to new regions. Aggressive growth strategies are welcome during this stage and this is where strategic partnerships are formed.

 

6. Exit Stage (Maturity Stage)

This is the final stage and it marks the transition from a high-growth startup to a stable and established company.

This is the point where the company begins to focus on profitability and long-term sustainability. The founders and investors may decide to pursue exits through mergers, initial public offerings (IPO) or acquisitions.

 

The Early Stage Tech Startups

Now that we’ve established the 6 stages of startup, let’s examine the structure of an early-stage tech startup. When it comes to early-stage startups, every team member is expected to wear multiple hats for the progress of the company.

The departments in an early stage tech startup include:

1. Founding Team: These are the CEOs and founders who set the vision, strategy and culture of the startup. They are in charge of making high-level strategic decisions and building investor and stakeholder relationships.
2. Product development: This is where product managers, UX/UI designers and software developers come in. They are to identify customer needs, build the product, test and iterate on the product.
3. Engineering/Technology: They are the team responsible for handling system architecture, writing code and managing software development cycles.
4. Marketing: Having a team of engineers means nothing without the team responsible for product awareness. From marketing managers to SEO specialists and social media managers, their job is to build the brand and position the product in the market.
5. Sales: The key roles under this team include a Business Development Representative and Sales Lead. They ensure that revenue is coming in nicely, build customer relationships and help gather feedback from users.

 
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Vital Goals of an Early Stage Tech Startup

To understand the difference between early stage vs mid-stage tech startups, here are some of the vital goals of an early stage startup:

1. Building the Minimum Viable Product (MVP)
   Considering this is the first step in the right direction of product validation. A simple version of the product with key features to attract early adopters and validate market demand needs to be built quickly.

   The MVP is to help gather the right insights without wasting financial and human resources on an unsure idea.

2. Validating Product-Market Fit
   A startup’s success is determined by the assurance of a product solving real problems for its intended target audience. Through accurate user feedback, startups can know whether their solution adequately meets the users’ needs.

3. Building the Founding Team
   Just like every strong building we see, it all starts with a strong foundation. A startup’s team is a major factor for success. Investors also consider this before engaging any startup. The team would always consist of individuals with the right vision and ability to thrive in uncertain environments.

4. Getting Initial Customers
   The first traction of a startup is critical. Startups work to acquire their first paying users to prove that there’s an actual demand for their product. They leverage social media, word-of-mouth and personal networks to succeed.

5. Securing Seed Funding
   Most early stage tech startups need external funding to aid operations and growth. Venture Capital firms, angel investors and startup accelerators are common sources of seed capital.

   The funds are used to hire more talent, aid product awareness and develop the product.

 

Early Stage vs Mid-Stage Tech Startups: Key Differences

Now that there’s been an established definition of both stages, here are the key differences between early stage vs mid-stage tech startups:

 

Categories	Early Stage	Mid-Stage
Structure	A small team with not clearly defined roles.	A more formalized and specialized team with adequate structures in place.
Cultural Identity	Company culture isn’t defined and created by the founders of the early team. Open to change in the long run.	Culture becomes more formalized with defined values and operational processes.
Success Metrics	Success is measured using user feedback, MVP validation and initial revenue.	Success is measured using revenue growth, customer retention and market share expansion.
Funding	Funding is gotten from personal savings, angel investors or accelerators.	Funding is gotten from Series B or C funding from venture capital firms or strategic investors.
Decision-Making	During this stage, founders are responsible for most decisions made. Mostly based on limited data or instinct.	During this stage, decisions are data-driven, combined with the contributions of department heads and advisors.
Technology Stack	Early stage startups are limited to low-cost or open source tools. This is mostly done to save resources.	They move to scalable enterprise-grade technologies to support growth.
Risk Appetite	They are high-risk tolerant and willing to experiment with revolutionary ideas.	They begin to move towards risk management in order to balance innovation with stability.
Scalability Issues	During the early stage, scalability isn’t the current pressing issue. They focus on validating the solution.	Scalability is critical during this stage. Processes and infrastructure are optimized for growth.
Customer Feedback	Feedback is mostly gathered from smaller groups.	Feedback systems are more robust, involving surveys, user data and analytics.
Product Complexity	Early stage tech startups focus on delivering a simple MVP with minimal features.	The product evolves in this stage and the team integrates more advanced features.

 
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How do Funding Strategies Evolve from Early to Mid-Stage Startups?

With consistent growth, funding strategies shift over time as they adapt to their market realities and goals. Here’s a simple breakdown of how these strategies evolve and why RocketDevs is the perfect partner to fuel your growth.

 

Early Stage Funding Strategies

1. Bootstrapping: Startup founders rely on personal savings or initial revenue generated by early users to fund operations.
2. Personal Connections: Also known as friends and family funding, they invest in the founder’s idea based on the passion and vision communicated by the founder and their relationship.
3. Angel Investors: Early-stage startups are the biggest attractors of angel investors. They offer small capital in exchange for equity and they act as mentors and provide needed guidance.
4. Accelerators and Incubators: Programs like Y Combinator provide seed funding, networking opportunities and mentorship in exchange for a small equity stake.
5. Crowdfunding: Platforms like Kickstarter allow startups to raise funds from a wide audience in return for early access to products or services.
6. Seed Round: These seeding rounds are usually led by angel investors or micro venture capital firms to provide capital for product development and initial scaling.

 

Mid-Stage Funding Strategies

1. Series A Funding: Series A funding is raised to scale a startup’s user base, make operations smoother and optimize the product. You must have a detailed metric like revenue growth and customer retention to show investors.
2. Series B Funding: During this stage, startups move into new markets and develop complementary products. Large venture capital firms participate by bringing major capital to fund large growths.
3. Strategic Partnerships: Collaborating with the right companies or key industry players can help with funding, resources or distribution channels to accelerate growth.
4. Private Equity: Large corporations or private equity firms invest in startups to gain strategic benefits such as new technologies.

 
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The RocketDevs Advantage

Building a startup doesn’t just look expensive in an article, but in reality too. You definitely need the right help to scale fast and right.

RocketDevs, being the ideal partner for startups, will help you navigate the various hurdles of scaling from early stage to mid-stage. Here’s how RocketDevs supports your funding and growth journey:

1. Access to the top 5% of developers in the industry.
2. Optimized for cost efficiency and quality by hiring dedicated developers for each project.
3. Pre-vetted developers to make things faster and smoother.
4. 100% Transparency by giving you access to each developer interview process as well as a 14-day trial with the developer chosen.
5. Help boost investor confidence by showing off your startup as efficient, thereby increasing the likelihood of securing the next funding round.

Get the best developers on the web, screened to Silicon Valley Coding Standards, starting at $8/hr, risk-free for 14 days

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