Startups are like children: they go through a series of stages. How they are managed through the series determines the health of the outcome. It is easy to know the stages, yet very challenging to manage the new enterprise through them.
This short series focuses on what the startup stages are during the early years, what is important about each, and how to manage the startup through the stages to win.
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Let's start today with the stages each startup will pass through. Like the stages of a baby, the stages for the new enterprise are unavoidable. Let's get familiar with them and then you'll feel more creative and courageous managing through each stage.
- The Idea. Your
idea for your first startup will just pop up one day. Yes, you can be
searching and thinking about ideas for months. Some entrepreneurs work
years or more, that is how most people begin. But a rare few just get
the idea one day and go from there. I've not found a process, a drink
or a mountain top on which to reside to find that great idea. Instead,
I think that the initial idea is like the thought the parents have
before making the baby: it is where you start, what eventually is born
will be very different than what you started thinking about. Serial entrepreneurs will agree and so will experienced VCs. You can think of this like the ultrasonic pictures of the living, tiny baby (medical people call it a fetus).
- The Demo. This comes next. You will create something visible to show off your idea so you can communicate more to other people who may join your startup, to potential investors and to friends who can help you shape your idea further. The demo may be of a causal game, or a few web pages of your social network site, or a mock-up of the medical disease sensor device. This gives clarity to a confused audience, tests your ability to be realistic and stirs excitement about your cool, clever idea. Think of this like hearing for the first time the heartbeat of the growing baby.
- The Prototype. This is more serious than the demo and takes a lot more work. It is a working prototype, does something valuable and notches up the emotional excitement of the viewers. You often will need some very clever engineers to complete the working prototype. They usually expect to be paid for their (often very difficult, creative work). The outcome of the work will begin to tell you how difficult or trivial the technical challenges are going to be, what the first estimates of cost to build it will be, and what you could and could not do with it to make more money. Think of this like feeling the baby kicking inside mother's womb.
- The First Product. Now we are getting very serious. This is the thing (product or service) that you are going to sell to your first customers. It comes with a lot of details describing it, it works very well, and it does valuable things for the end user. When added to your Business Model, it will enable you to generate a lot of revenue (sales) in a short period of time. Your marketing work will have shaped the first product after the prototype was completed. A lot of hard work by a lot of people will get you to this stage. it will cost you a lot of real money. Along the trail you will have encountered a lot of surprises, good and bad. Your responding decisions will shape your First Product. Your idea will be well beyond and very different than your initial idea. This is the final months stage in the pregnancy. The baby is about to be born.
- The Launch. "For Sale" is what happens now. You are going to offer your First Product to the world to use. It may mean a public beta for an online game. Or it might be sale to distributors of your first semiconductor. Your plan may call for immediate cash from sales, or it may call for eventual revenue from advertising. But "it" is now "sold" to people who are or will get it to end users. When an end user is using your creation, your product is launched. Congratulations. This is the launch of the first rocket payload. There is no turning back. It is for real. It is very public. Everyone is watching what will happen next. It is exciting and frightening. Think of it as giving birth to your first baby.
BOTTOM LINE: After this, it's a matter of growing your business. If you get the first five stages done well, your baby will be born healthy with a good chance of continuing to successfully go through the stages of adolescence that follow. Knowing the stages your startup will go through is the first step. Next comes understanding the importance of each so you can manage them all with brilliance. That knowledge will attract the people you are missing, the investors you need and the media attention you must have to win. It is a key to building an unfair competitive advantage. You can do it!
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Tomorrow I'll discuss the importance of each stage.