The 5 Phases Of Startup

I've been reading about startup since a year ago, on and off. I've read books and watched videos. So I think I'll write what I learn to help myself solidify those ideas.

There are many definitions of what startup is, but the one that resonates with me the most is Steve Blank's:

A startup is a temporary organization used to search for a repeatable and scalable business model.

I do emphasis on the "temporary" because the goal of startup is not to be a startup anymore. I also emphasis on "search" because you'll try different ways to find a scalable business model.

When building a startup, people used to spend months to build the product/service and hope somebody will like it and pay. This approach is risky. You will not know whether there will be enough people to buy your product until you have finished building it.

This risky approach is quite common until Eric Ries published Lean Startup book and began the Lean movement. The core idea of Lean is to cut waste. You can spend 2 hours building a landing page instead of 6 months building a complete solution to learn if anyone is interested with your product. In other words, you "build what you can sell" instead of "sell what you can build".

This idea is the foundation of the books I've read. Each of those book implements the idea differently. Well, they are not totally different. They are just named and grouped differently. However, I find that the one from Lean Analytics as the most intuitive.

In Lean Analytics, Alistair says that, to build a successful startup faster you would want to go through these phases:

  1. Empathy
  2. Stickiness
  3. Virality
  4. Revenue
  5. Scale

In Empathy phase, your goal is to find a problem worth solving and the most proper solution for it. A problem worth solving is a problem that is painful enough for a big enough number of people. If the problem is not painful enough, nobody will bother to pay you to solve it. If there is only a handful of people with the problem, you might not sustain in the long run.

The fastest way to find a problem worth solving is to talk to your target customer. This sounds easy, but it is not. There are some techniques for talking to those people, but I'll not detail it here.

In Stickiness phase, your goal is to tweak your product so that your users stick around. If you are making a game and your users only play once and not finish the game, do you think your game is a success?

One common startup mistake is spending lots of money to acquire users only to find out that 98% of them don't stick around. When you think about this, it makes sense to acquire a few users first and tweak your product to make them stick before acquiring lots of users.

In Virality phase, your goal is to make your current users eager to tell others about you. They will bring new users to your product. Virality helps you spend less money when acquiring users later on.

In Revenue phase, you focus on maximizing revenue per user. You tweak the pricing or introduce new premium features.

Lastly, the Scale phase. This means you are confident about your business and starts to pour more money to gain more market.

People say that to make a successful startup you need 3 things: Focus, focus, and focus. My problem with this statement is that it's not clear what to focus on. The phases outlined above should be a good guidance on what to focus on.