The Lifecycle of Start-ups :-
Start-ups are diversified and complex, these entities have their lifecycle. Hopefully, research on start-ups’ lifecycle is well-developed in the last few years. Since the sequence of activities and stages might vary among different start-ups, a holistic perspective is presented in this paper to offer a better understanding of the lifecycle of start-ups. The stages are as follows:
The entrepreneur himself initiates a series of activities in this very early stage, to turn his / her idea into a viable business. Nevertheless, he/she finds a higher degree of risk or even uncertainty, continues to work on the new venture concept, makes a team, uses personal funds, and asks family members and friends to invest in the project.Bootstrapping, which is sometimes defined as highly creative ways of acquiring the use of resources without borrowing is considered to be one of the areas of entrepreneurship research that most needs to be addressed. This stage aims to position the growth venture by demonstrating product viability, cash management capacity, team building and management, and acceptance of the customers.Moreover, angel investors are more likely to invest in this stage.
The founder begins a new stage after the bootstrapping stage which is the seed stage. This stage is characterized by teamwork, development of prototypes, market-entry, venture valuation, the quest for support structures such as accelerators and incubators, and average investment to grow the company.Frankly speaking, the seed stage is a mess for most companies and is viewed as highly unpredictable. The stage of seed is defined by the initial capital used to do the product and/or service.Thus, the founder seeks support mechanisms such as accelerators, incubators, small business development centers, and hatcheries to accelerate the process. A great number of start-ups fail in this stage. Since they couldn't find support systems and, in the best case, would turn to a non-profit business with a poor performance rate. On the other hand, those who manage to get help will have a better chance of becoming successful businesses. Typically, evaluation is done at the end of this point.
Some researchers claim that when the development stage ends, entrepreneurship ceases. This supports the argument that the bulk of the theories that concern start-ups are taken from theories of entrepreneurship and not from the theories of management and organization.Organization/company is established at the end of this stage and corporate finance is considered to be the key option for funding the business. By financing the venture, Venture capitalists may promote the stage of development.
You’ve got a product that works, you’re nailing down your best marketing practices, your business model is proving itself - now you need to grow into your potential. However, a word of caution: it’s very common for start-ups to try and scale before they’re ready, and this is rarely a good idea. Trying to grow too fast, too soon can lead to burnout and wreak havoc with your brand image. Remember, the bigger you get, the bigger and more established your competitors will be. So, don’t go there unless you’re certain you can hack it.
You will know that when your channels start reaching the saturation point you are ready to scale. When that happens, bring in specialists to broaden these networks and put money in.That is likely to mean seeking more funding (you’ll probably be pitching to VCs by this point), building your team and company culture, and investing in external partners to help with specialist areas. This is where the real work starts, so remember that you don’t necessarily have to scale all channels at once, however, you may well find that scaling one channel depends on wider scaling throughout your organization.
The definition of ‘maturity’ for a company is pretty broad. After all, the most successful companies are those which are constantly pushing growth experiments, fine-tuning their product, scaling (or scaling back) channels, and generally in a perpetual state of flux. So who’s to say when a company has finally ‘matured’? However, if you’ve got an established foothold in the market, have a good customer retention rate, are influencing your industry, and turning a profit, it’s a fairly good bet that you’re nearing maturity. At this point, depending on your ambitions, you might be thinking about exiting through acquisition, or, if you’re thinking big, by listing on the public markets. On a personal level, you might also want to take a holiday, finally, regain your work-life balance or, if you’ve caught the entrepreneur bug, think of a new business idea to start!
Challenges of start-ups
There are some common challenges, most of the challenges are unique, and the extent to which they affect start-ups differs. Some of the main common challenges are as follows:
As mentioned earlier, finance is an integral part of the start-up process. For many factors and at various points, any company will be facing financial difficulties and challenges. For example, the founder negotiates with family members and friends while bootstrapping to persuade them to invest in his / her idea.He/she invests in the company and since the concept is in its early stages, maybe he/she needs more money to develop it. The creator should then look for angel investors in the seed stage, and persuade him/her with fair valuation plans.First, the entrepreneur should prepare a proposal in the development stage along with supporting documentation to take advantage of venture capital.
Start-ups usually begin with one founder and/or a few co-founders. The creator needs more expertise to build prototype, MVP, etc.Then, he/she has to negotiate with people, make a team, and finally hire employees. This process is so critical to success and if the founder lacks enough knowledge of the field, the start-up might fail due to human resource management issues.
Several support mechanisms play a significant role in the lifecycle of start-ups. These channels of funding include seed investors, hatcheries, incubators, science and technology parks, accelerators, centers for small business growth, venture capital, etc. Failure to reach such support systems raises the probability of failure.
Last but not least is the effect of environmental elements. Many start-ups fail because of a lack of attention to environmental factors, such as emerging trends, business constraints, legal issues, etc. Although a positive atmosphere encourages start-up success, a failure may result in a maleficentone.The environment for a start-up is even more difficult and critical than for an established firm.
This paper explained and conceptualized start-ups by elaborating on their lifecycle. The lifecycle involves three main phases that are the stage of bootstrapping, the stage of seeding, and the stage of growth.Moreover, the paper concluded that among the three main streams of research on start-ups, entrepreneurship theories are the most dominant theories. Finally, the paper listed four major problems facing start-ups. Researchers might elaborate on each of the mentioned stages, and study the challenges in different areas. Also, scholars might compare the existing theories of management, organization, and entrepreneurship to develop a comprehensive theory of start-ups.
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