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05/12/2022

5 Main Stages in Startup Product Development

In this article, you will learn about the startup planning process and startup product development. But first, let’s figure out what a “Startup” is.

5 main stages in startup product top
5 Main Stages in Startup Product Development
Contents

What is a Startup?

The very concept of “Startup” arose almost a hundred years ago in the United States. Two students at Stanford University, Hewlett and Packard founded a small company that everyone now knows by HP, and called this launch of their project “start-up”. Officially, it is believed that this term was first used by Forbes magazine in August 1976 and Business Week in September 1977.

A startup differs from a classic business in the speed of development and project launch. A typical business may already start with the purchase of a franchise or copying the business model of other market participants. A Startup starts with an Innovative Idea.

The need for a quick launch is due to the fact that several entrepreneurs can simultaneously develop similar ideas. A Startup is either fast or dead.

When creating a new product, a Startup finds itself in conditions of low competition or its absence at all, which allows a Startup to grow and develop rapidly if the service is in demand by the market.

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Importance of Planning Stages in Startup Product Development

All startups go through successive stages in their development. It is important to understand that startups are subject to the same business law as classical entrepreneurship. Even technology startups require good management and marketing in the company.

The largest share of the costs goes to research and development of the project at the initial stages of development. Without high-quality analytics even before the first phase of startup product development, the project has every chance of not even entering the market. According to various estimates, about 40% of startups close after the first year of life. In the second year, this figure reaches 70%. That is why it is important to take very seriously not only the process of developing a product, but also building the right business processes while creating your own startup.

Idea and Business Formation

The beginning of any startup is the birth of an Idea. Once you have an idea, before taking the first steps in its implementation be sure to ask yourself questions the answers to which will allow you to assess your strengths and set your first business goals.

✔️ How much working time do you plan to devote to your new project?
✔️ Do you have deep knowledge and expertise in this field of activity?
✔️ What customer problem do you want to solve with your idea?
✔️ What is the profile of your target client?
✔️ Do people have a request for a similar product?
✔️ Can your product cost as much as customers are willing to pay for it?
✔️ What market is the product aimed at?
✔️ What are the company’s goals for the next 12-24 months?
✔️ Where do you plan to get funding?

“Big things have small beginnings” (Lawrence of Arabia)

Do not try to immediately calculate everything to the smallest detail. There are many examples of well-known startups that have radically changed their concept after the launch. For example, Instagram at the seed stage targeted alcohol lovers as its target audience.

5 Core Stages of Startup Product Development

There are different classifications of product startup development stages, but they are all very similar. Some classifications are more detailed than others. Somewhere one stage is divided into 2 or 3. Let’s figure it out.

5 main stages in startup product eng

It is customary to single out the following 5 Startup Growth Development Stages.

1. Pre-Seed Stage

At an early stage of startup development, an idea is formed and its viability is assessed. The market and potential target audience are being researched, a business plan is being created, and terms of reference are being formulated. Prototyping, testing, finding investors – all this happens at this stage.

2. Seed Stage

At this stage, the business idea is verified. The created prototype and MVP receive feedback from investors and beta testers, marketing research shows the reaction of the audience to the product. This is perhaps the most important and difficult stage in the development of a company. If a startup does not receive investment in a short enough timeframe, it will die. This is where most startups end up.

P.S.: Tell me, have many of you heard of Clubhouse and still remember what it is? Exactly!

3. Startup Stage

After receiving funding and developing the first stable version of the product, the process of bringing it to market starts. Marketing is included in the whole work, the success of the product depends on the quality of its work. Poor marketing and business processes at this stage can make all previous efforts and investments useless.

4. Growth Stage

At this stage, a startup becomes more and more like a classic business. The importance of the work of management and the quality of business processes in the company is greatly increasing. At this moment, the number of employees increases, the structure is formed. The startup starts making money.

5. Exit Stage

The company reaches its peak in the speed of its development. Rapid growth stops, investors receive their profits, and the business moves to a sustainable level of development. It is the moment that a startup ceases to be considered a startup, and already moved into the SMEs category.

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This is the classic approach. Like a textbook. I would like to take a slightly different approach to the stages of developing a product startup. Let’s highlight the main stages of creating a successful startup and then analyze them in more detail.
  1. Finding the right product-market fit.
  2. Ideation and business formation.
  3. Proof of concept.
  4. Scaling business.

Now let’s take a look at the steps you need to take in detail. You have to go through the following stages of growth in thedevelopment of a startup product.

1. Idea Generation

An idea can come from anywhere. A startup idea doesn’t have to be something completely new to the market. UBER was created when the taxi market was already completely filled. But a new look at how and by whom a taxi service can be provided has created a whole completely new industry that has completely changed this market.

2. Market Fit & Screening

However, after you have a brilliant idea, do not be too lazy to google if someone else came up with it before you. Maybe this idea has already been implemented.

Remember that your idea must match the market. You can come up with a very useful thing for every person in the world, but it will cost so much that there will not be enough buyers for it on the entire planet. Don’t try to blow up the market with disruptive technology. Sometimes a small improvement is enough (remember about UBER).

3. Business Analytics & Business Viability Testing

Search for the target audience, its analysis, sales market and marketing cost. At this stage, it is necessary to determine a strategy for the development and promotion of a startup, evaluate the necessary investments, analyze competitors, determine costs and pricing.

You must analyze the viability of your idea from a business standpoint.

4. Product Development

This step starts with developing a concept and finding or hiring the right development team. I will talk about this separately a little further in the text.

4.1. UX/UI Design

A concept is an idea fully embodied in all its elements. A UX/UI designer visualizes your idea, gives it form and implementation.

4.2. Technical Task

Detailed design at this stage of startup development does not make sense. The project is developing and growing in real time, taking into account the wishes of users and the new vision of the author. 

4.3. Prototyping

This is one of the most important stages in the development of a new product, as it marks the transition from idea to implementation. Learn more about prototyping in our article on it.

4.4. Minimum Viable Product Development

MVP allows you to create a product that can be offered to focus groups and investors as something that can be “touched”. We wrote about the importance of creating a prototype and MVP in our other articles.

Remember that the cost of an MVP should not be more than 10-20% of the cost of a full-fledged product. Remove all unnecessary at this stage. Focus on the essentials.

4.5. Product Testing

It is difficult to create a reputation, to destroy – in one moment. Therefore, it is very important to fully test your product even at the stage of creating an MVP. 

5. Proof of Concept & Investment Attraction

The next step is the proof-of-concept or revitalization phase. This is when a company begins to refine its original idea and create a predictable, sustainable business

At this point, there is an urgent need to attract an investor. Money can be provided to you by a business angel, a venture fund, or just a wealthy person who is interested in a profitable investment. For example, one of your relatives or friends.

It is important to understand what part of the business you are ready to give to the investor. In order for the project to have a chance to survive, some experts recommend giving no more than 15-25%. Arrange meetings with a large number of investors, find a few potentially interested partners, and proceed to negotiate the structure of the deal and close it. Do not be afraid to challenge the proposals of investors and offer your own conditions. Clearly define the limits of investor control and options for exiting the business.

6. Full-Fledged Product Development and Testing

Once you’ve analyzed the market response to an MVP, you can move on to full-blown product development. In this article, I will not describe in detail the process of developing a startup product.

As a rule, after development, all technological products go through several stages of testing.

6.1. Alpha Version of a Product

Version for testing by developers, company employees, friends and relatives who can keep this information inside “the family”. 

6.2. Closed Beta Version of a Product (private beta)

Corrected version of the product after the first stage of testing for testing by a limited number of people. Often, this involves a certain number of users from among those who want to use the product. 

6.3. Public Beta Bersion of a Product

This is a trial version of the product that appears in the public domain. Everyone can use this version, but they are warned that this is not the final version of the product yet, and it may contain errors. 

7. Planning & Commercialization

After the product has passed all stages of testing, it is necessary to develop a marketing strategy, ways to monetize the product, plan its presentation, time to market, and so on.

Commercialization is one of the most important stages. Wrong positioning can destroy your business at the start!
Keep in mind that almost always investments in marketing and sales of a product are several times higher than the budget of the product development.

8. Product Launch

The most enjoyable stage for the founder of a Startup. Just do it!

9. Scaling The Business

The final stage of a startup is the validation of the business model or the scaling stage.

Here, a startup company becomes (or not) a Unicorn Company, goes public, starts selling shares and receives additional capital for large-scale business development.

This may entail opening new offices in new countries, expanding into new markets, expanding product functionalities, and so on. The caterpillar finally turns into a butterfly.

Consider Fideware Your Trusted Partner in Developing Your Startup

There are many key roles in creating a project: founder, investor, business analysts, project managers and product managers, UI/UX designers, developers, QA engineers, marketers, and so on.

In any case, when you create your own company, including a startup, you will need a team to whom you will need to delegate important areas of work. There are several development options. 

Your own development team

Putting together your team is not easy. If you have no experience in development, it will be difficult for you to assess the level of developers. In addition, they will need to rent an office and purchase equipment. But it will be much more difficult to hire employees. 

There is a shortage of personnel in the IT market, large companies are actively competing with each other in hiring good developers. Almost every company has its own HR, which is constantly in search of personnel. The task is not easy, and can take a lot of time and resources from the founder.

Freelance

This option is suitable for a small startup with a small budget. On freelance, you can find people who are ready to complete a task for little money. True, the more difficult the task, the more freelancers you will need. And the more there are, the more difficult it is to coordinate them. One freelancer may be in Latin America and the other in Eastern Europe, in different time zones, and they are not familiar with each other’s skills. Coordinating such employees will require a lot of effort and time from you.

Outsourcing

As right, the most common option for ambitious ideas. Fideware specializes in working with startups. We help not only our clients and partners, but also launch our own startups

Hiring an outsourcing team is an investment in the quality of your product. Outsourcing companies like ours provide a full range of services, from design development, prototype and MVP to full product development and testing.

In addition, the project manager will keep you up to date with all the details, and you will be able to focus on the main thing: promoting the product and finding investors.

You can start working with us at different stages of startup development, even if you initially chose a different path. Find out about our IT Сonsulting Service.

Final Thoughts

All startup founders dream of creating a Unicorn Company. Every year in the world, millions of people launch hundreds of thousands of start-ups, of which thousands become successful, hundreds become famous, and a few become great.

Brilliant ideas are regularly visited by thousands of bright minds around the world. But only a few manage to realize their ideas. Why is this happening? It must be remembered that a startup is not a pleasure trip. A startup is a complex and painstaking job.

Of great importance in the success of a startup is the ability of the founder to delegate, allocate resources and think strategically. In a startup, as in any business, there are no trifles. Bad management will ruin the best programmers in the world. Wrongly built marketing will destroy the company with the truly best product in the world, which no one will ever know about.

Very often, founders get hung up on the product and its quality, forgetting about other things. Business is business. And startups also obey the laws of economics. Remember about all the factors influence growth.

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FAQ

The most obvious difference between a startup and classical entrepreneurship is the innovative nature of the startup project. Here are some of them:

  • Creation of a new market (buying tickets for events via the Internet)
  • Provision of services in a new way for the market (ordering a taxi through the application, not by phone)
  • New product for an existing market (Uber’s entry into the taxi market)
  • Modification of an existing product (for example, payment from a phone balance or a bank card via the Internet)

There is no answer to this question, because the answer is always individual. Some startups seek to recoup their investment already at the product launch stage. Others, such as Facebook, may not start the monetization process for years, but at the same time the company’s shares will skyrocket in price, and the company’s value is estimated higher than General Motors.

Consult with financiers, do business analysis, consult with your investors and write a business plan. Everyone will have their own.

There is no single answer to this question. For example, Alex Wilhelm of TechCrunch came up with the 50-100-500 rule.

The rule says that your business is no longer considered a startup if at least one of three conditions is met:

  • The company’s income is more than $50 million per year;
  • The company employs more than 100 employees;
  • The value of the business, including securities, is over $500 million.

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