The Six Stages of the Startup Lifecycle

As far as I can tell there are six stages to a startup lifecycle.  What is super-convenient for this blog post is the fact that all somehow end in the same three letters: I-R-E.

STAGE 1:  DESIRE

If there is one thing that all great founders share, it’s that they have an insanely strong desire to solve problems and make a dent in the universe.

People like Jeff Bezos (Amazon) or Muhammad Yunus (Grameen Bank) started their companies because they ran up against problems that ate at them day in and day out, consuming their every thought until they had no choice but to quit their job, put everything else aside and solve these problems.

Don’t start a company  because you watched the Social Network and you think it would be cool to be the next Zuckerberg. If you start a company with the goal of becoming rich and famous, I can tell you two things:  (1) you are likely going to fail; and (2) you are a giant turd sandwich.  In all fairness, there is nothing wrong with wanting to get rich, but if your main motivation is accumulating wealth, there are many  less circuitous paths toward this end.

Challenge:  Next time you give your elevator pitch, spend  the first 15 seconds explaining the problem before you start pitching them on the solution.  If the person is not moved by the significance of the problem, chances are you’ve created a solution for a problem that doesn’t really exist.

Image stolen from the mucho-awesome Happy Startup School

STAGE 2:  INQUIRE

Once you’ve discovered a problem you are passionate about fixing, it is up to you to inquire and learn as much as possible from people who have been in your shoes. Go to meetups, listen to speakers at StartupGrind, volunteer at events like Startup Weekend or Lean Startup Machine.  Get engaged with the local startup community.  During this period, share your idea with everyone you meet (don’t worry about them stealing your idea) and seek out a mentor or two who is willing to coach you along this journey. No one succeeds without receiving help from others. Smart founders make use of the resources around them.

Challenge:  Find the email address of a successful entrepreneur you admire and email her.  Start a dialog by asking a succinct, one sentence question that she can answer in one minute or less.

STAGE 3:  BE ON FIRE

As my dino friend @FAKEGRIMLOCK says:

YOU MUST BURN

EVERYONE THINK WAY TO STARTUP IS TALENT + IDEA + MONEY.

EVERYONE WRONG.

STARTUP NOT ABOUT MAKE THING, SELL THING. STARTUP ABOUT CHANGE WORLD.

WORLD IS COLD. YOU MUST LIGHT WORLD ON FIRE.

YOUR FIRE.

YOU. MUST. BURN.

If you expect to change the world, you need to be on fire.  Passion is the fuel that feeds this fire.  Your startup is your baby.  And like a real baby, it WILL consume every waking minute of your day.  If you are not obsessed with your startup 16 hours a day, 7 days a week, your fire is not burning bright enough.

The flip side of being on fire is that everything else in your life takes a backseat to your startup.  There is simply no physical or emotional energy left over for anything else.  In the first few years of your startup, you end up sacrificing relationships with friends and people you love.   You stop exercising.  You have no regular paycheck so you start eating junk food because it’s all you can afford.  The idea of a normal dating life goes completely out the window.  Basically, the well-rounded, interesting person you once were ceases to exist. For better or worse, the new you is a stressed out, unhealthy, emotionally unstable robot with a single track mind to change the world.

Challenge:  For the next 30 days, don’t call or hang out with your friends or family, and spend no more than $10 per day on food, transportation, and entertainment.   This is what life will be like for the first twelve to twenty-four months of your startup.

BE ONFIRE

STAGE 4:  HIRE

The company with the smartest people  wins.

At a certain point, you will have found product-market fit (hooray!) and  it will be time to scale your company.  From here on out, everything comes down to execution execution execution.  Execution starts with finding the best talent.

The common refrain when it comes to hiriing is that smart founders always hire people that are smarter and more capable than themselves. As someone who is admittedly not very smart, I absolutely, 1000% agree with this statement.  But recruiting smart people is not enough. It’s equally important to recruit people who think differently than you do and who are going to challenge your ideas.  This raises the bar for the whole company and pushes everyone in the company  to achieve at a higher level.

Challenge: Before hiring anyone, ask yourself, do I believe this person can take X responsibility off my plate and do it ten times better than I could do it myself?  If the answer is no, they are not the right person for the job.

STAGE 5:  INSPIRE

Once you have great people on your team that you trust completely, you stop shouldering as much of the day-to-day work and your main role shifts to inspiring your team to produce at a level beyond what they thought was possible.

To use a sports analogy, your goal is to move from player to coach.  More specifically, you need to become Phil Jackson.  Jackson won 11 NBA championship rings as the coach of the Bulls and the Lakers.   Of course his championship teams started with an incredibly strong core of talent (Jordan, Pippen, Shaq, Kobe), but they didn’t win on talent alone.  And they certainly didn’t win because Phil was calling all the shots from a tactical standpoint (Jackson was notorious for not calling timeouts when his team was going through a rough patch, but instead trusting his players to figure it out).  Rather, the secret to Jackson’s 11 championships was able to get the most out of his players.  He knew how to get inside his players heads.  He inspired them and empowered  them to be the best players that they could be.

Challenge:  Are you more Phil Jackson or more Michael Jordan?  Do you trust people to take the big shots or do you feel the need to take all the shots in order for your team to win?  If you still feel the need to take all the shots, you may have hired the wrong people.

STAGE 6:  GET ACQUIRED

When you’re raising capital, one of the common questions you get from VCs is “who is going to acquire you?”  The answer everyone gives is “Google, Facebook, (maybe AOL if this was 1996).”  The real answer, of course, is “who the f*ck knows?”

Getting acquired is partly outside of your control and focusing on it too much at the early stage may be putting the cart before the horse.  The best piece of advice I’ve ever received from someone who has sold their company is: build a company that solves a real problem, delights your customers, and has a strong P&L.  If you do these things someone will want to purchase you.

circle of life

The alternate route is stage 6B: the Acqui-hire. At this stage, your Startup dies and your engineers go back into the startup ecosystem to be reincarnated as a killer photo-sharing app.

Tagged

31 thoughts on “The Six Stages of the Startup Lifecycle

  1. RG Riles says:

    Ethan, as always, you nailed it. It’s concise, a fun read, and is ripe with truth! One question, what if you don’t want to sell? -RG Riles, Founder, In-Bound Marketer

    • Ethan Austin says:

      Thanks RG. Good call. The last one was too narrow. I just used “get acquired” because EXIT didn’t end with IRE. And truthfully, most businesses won’t exit. If you are profitable, enjoying what you’re doing, and have no investors that need you to exit, then there is no good reason to sell. Keep the business going until its no longer fun or interesting.

      • R.G. Riles says:

        Ahh, yes, the VC’s of the world. Always in a hurry for you to get the dang project done and sell it for them. Vultures! But, we must love them, right? I’ve often wondered whether I could lure a VC, so I could quit my day job to spend more time with my project… perhaps a good idea for an article or a hearty discussion? I’m sure many others out there with an established project, without any revenue (as of yet), and not enough time to work on their project to make revenue in the immediate future, have often wondered the same. What say you, and what say the others out there? (I think I know the answer – but it’s always a worthy discussion)

    • ethanaustin1 says:

      R.G. – I think Chris Dixon has done a good job answering the question whether to raise capital — http://cdixon.org/2012/07/19/shoehorning-startups-into-the-vc-model/

  2. Tom says:

    There’s too many turd sandwiches walking around.

    Good post. I definitely see some Seth Godin inspiration in there.

    • ethanaustin1 says:

      Thanks Tom. Am curious, what parts remind you of Seth. I read a lot of his stuff. I certainly hope I didn’t unwittingly steal one of his ideas and write about it as my own w/o giving credit.

    • ethanaustin1 says:

      Thanks R.G. The burning part came directly from @FAKEGRIMLOCK. As to the advice on getting acquired, that came from a mentor by the name of Eric Langshur.

      • R.G. Riles says:

        Oh I wasn’t being accusatory – just guessing which parts sounded like Seth to the other commenter. I always enjoy your posts and love what Give Forward does so I make it a point to try to be an active commenter/supporter on your blog when I can. Going to check out that VC link you recommended now!

      • ethanaustin1 says:

        Yeah, I know. No offense taken at all. I was just trying to point out where those ideas came from.

  3. Uncle ed says:

    Ethan, Excellent! Insightful and instructive. I thouroly enjoyed reading it.

  4. [...] to doing good, starting up, turning crowdfunding inside out and getting acquired (or not — see this post) during our hour-long #StartupLab live chat presented by Citi. Bring your best questions, and be [...]

  5. [...] to doing good, starting up, turning crowdfunding inside out and getting acquired (or not — see this post) during our hour-long #StartupLab live chat presented by Citi. Bring your best questions, and be [...]

  6. [...] related to doing good, starting up, turning crowdfunding inside out and getting acquired (or not see this post) during our hour­long #StartupLab live chat presented by Citi. Bring your best questions, and be [...]

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  9. [...] A version of this post originally appeared on the author’s blog. [...]

  10. Fiona says:

    Hey Ethan, awesome post that ties in really well with what we’re trying to achieve at The Happy Startup School (Stage 1 mostly) http://thehappystartupschool.com/

    We’re on the road to building a global community of people that want to do things differently, placing happiness at the heart of their organisations. We believe there’s a better way to do business that starts with following your passion, like you point out. I noticed the yellow image you used is one of ours too, good to see it’s so influential :) It would be pretty good to get a credit underneath to help spread the word.

  11. [...] A version of this post originally appeared on the author’s blog. [...]

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  13. […] A version of this post originally appeared on the author’s blog. […]

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