Becoming a unicorn, the milestone at which a company's value exceeds $1 billion, is one possible outcome of the startup journey. There are more than 1,232 unicorn companies worldwide, including SpaceX, ByteDance (the parent company of TikTok), and Revolut. Most startups follow a longer and less dramatic development path, and that path is what this article maps.
There is a recognized path that is supposed to lead startups to success and consists of seven phases. However, only a small percentage of founders—less than 10 percent—succeed in following this path, and even fewer achieve unicorn status. Despite these obstacles, many entrepreneurs strive to pass through these stages every year.
Being an entrepreneur involves a lot of risks. And almost all of them are difficult to predict or manage. That's why it's not surprising that most young companies fail in the first few years of their existence. One of the reasons for this is that you don't have a clear idea of where you want your startup to go. For this reason, you need to know the phases of a startup to see when the right time is to raise capital so that your startup company does not go under.
This article examines the definition of a startup, walks through all 7 startup development phases, and maps the startup funding stages that go with each one.
Key Takeaways
- Seven stages run from idea to exit, and fewer than 10% of founders make it through the full path.
- Funding and product maturity move together, but rarely one-to-one. A company can sit in one development phase across two rounds.
- Series A marks the early stage. Series B is where the growth stage actually begins.
- Carta puts median Series B pre-money valuation near $119 million, with Series B and C valuations up 17.2% and 12.5% year over year in Q1 2026.
- An IPO is the exception. Acquisition is the far more common exit, and most companies reach neither.
All 7 Startup Stages at a Glance
Here is the full picture before the details. Each row covers what happens in that phase, who typically funds it, and what the product looks like by the end of it.
| # | Stage | Funding source | Product status |
|---|---|---|---|
| 1 | Idea Stage | Bootstrapping, founder's own money | Business plan or Business Model Canvas |
| 2 | Friends & Family, and Angels | Family, friends, angel investors | Clickable prototype or demo |
| 3 | Pre-seed | Pre-seed investors, accelerators | Minimum viable product |
| 4 | Seed | Seed funds, venture capital firms | Product generating early revenue |
| 5 | Early Stage | Series A | Proven business model, growing customer base |
| 6 | Growth Stage | Series B, Series C, bank loans | Scaling product and team |
| 7 | Exit Stage | Public markets, acquisition | Established market position, IPO or sale |
Not every company passes through all seven. Some stop at pre-seed, others skip straight from seed to acquisition, and the boundaries between the stages of a startup blur in practice.
Source: LITSLINK, based on standard venture funding stages.
What Is a Startup Company?
Before considering all the stages a startup business goes through, let's define what a startup actually is. Different sources provide varying interpretations of what defines a startup business. Let's focus on two explanations that we find complement each other.
As per Investopedia, a startup is characterized by three aspects:
- It offers a product or service with the aim of capturing a market.
- It lacks funds to progress to the stage of business development, prompting founders to explore funding options from various avenues such as venture capitalists.
- There is a probability of failure exceeding 90%.
Another definition suggests that:
A startup is a company founded by an entrepreneur (or a group of them) to meet market demand (sometimes hypothetical) with the help of a product or services they provide under uncertain and volatile conditions.
As a rule, such companies are funded by founders, their families and other investors at different stages of startup development. Let's have a closer look at them.
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Startup Funding Stages Definition: What Each Round Means
Startup funding stages are the sequence of investment rounds a company raises as it grows, each with its own typical investor, check size and expectation. Understanding startup development means understanding this sequence, because funding and product maturity move together.
| Round | Typical investor | What investors expect to see |
|---|---|---|
| Bootstrapping | The founders | An idea worth spending their own money on |
| Friends and Family | Personal network | Trust in the founder more than the product |
| Angel | Private individuals investing their own capital | A prototype and a plausible market |
| Pre-seed | Pre-seed funds, accelerators | Market validation and an MVP |
| Seed | Seed funds and early-stage VCs | Early revenue and customer traction |
| Series A | Venture capital firms | A repeatable business model |
| Series B and C | Growth-stage VCs, banks | Proven unit economics and a scaling plan |
| IPO or acquisition | Public markets or a strategic buyer | An established market position |
The startup funding stages rarely map one to one onto the development phases. A company can spend two years between seed and Series A, or raise a large seed round and skip the pre-seed entirely.
What Are the Stages of a Startup? All 7 Startup Development Phases
There's no exact or universal classification of startup phases. Hence, you may find a lot of scattered information and definitions across various sources and from different entrepreneurs. This is because startup development stages are as volatile as startups themselves, and they can be convoluted and, to a degree, intertwined. That's why it's difficult to draw a clear line where one stage finishes and another one starts.
To clear up this ambiguity, we distinguish seven core stages, we try to distinguish seven startup stages based on our experience:
- Idea Stage
- Friends & Family and Angels Stage
- Pre-seed Startup Stage
- Seed Startup Stage
- Early Stage Startup
- Growth Stage
- Exit Stage
1. Idea Stage: Where Startup Development Begins
Every entrepreneurial endeavor starts with a business idea. No matter how you come up with it — during a brainstorm with your friends or colleagues, or you were just hit upon when you least expected it — it's a cornerstone of every business. Unfortunately, not every 'grand design' is actually new or innovative.
To avoid making a mistake by launching a product or service that nobody needs or wants, make sure that your "million dollar" idea can indeed make a difference. Conduct thorough research to see if your idea is fresh and can bring real value to avoid creating yet another copycat or mediocre product/service. A great idea for your future app that will never be outdated is tech-for-good. Read our blog to learn more.
At the idea stage, you are most likely to use your own means, as you're your own investor here. By bootstrapping and without any external help, you can sustain your startup company and create a business plan, create a business plan, or even better, use a Business Model Canvas. It'll help to "draw" a clear picture of who your customers are, what your unique proposition is, and to define your cost structure, revenue streams, and many other vital things.
What is a lean canvas model and how can startups use it? Click below to satisfy your curiosity! Read It Now!
2. Friends & Family and Angels: The First Startup Funding Stages
Coming up with a worthwhile idea and sustaining it with your resources is only the beginning. You need to expand your startup business, and for this, you'll need more money as your sources are already drying up. This is when the Friends & Family and also the Angels stage comes to the aid of your startup.
Usually, there are several comparatively reliable ways from which you can attract more investment — through your family and friends and angel investors.
Friends & Family is an investment round when the founder's kith and kin provide funds for the startup. Typically, these are people with whom the founders already have long-standing, strong relationships. Simultaneously with the Friends & Family round, you can ask angel investors (or just angels) to fund your business. They are a bit different from your friends and family members.
Angel investors, or simply angels (also known as private investors), are affluent individuals or groups with more than $1 million in cash (or assets) who can invest in startups in exchange for equity. They might be former entrepreneurs who want to invest their money in a promising venture. At this stage, it's essential to start thinking about forming a business structure, especially when looking for funding from angel investors. Choosing the right structure, such as an LLC, is essential for shielding investors' and your own assets from litigation. The sooner you choose the right structure, the better prepared you'll be to grow and secure investment.
As a rule, Friends & Family and Angels are an early stage when a founder wants to bring a product to market but needs outside support. With a business plan in place and new financial support, you can now work on a clickable prototype of your product. It can be a demonstration video (as with Dropbox), or something more interactive that gives customers a sense of what your product will be and how it can benefit them. Even companies like Airbnb and Uber didn't achieve their success in a day. Read our blog to explore their business models.
How to bring a startup idea into a fast and responsive social network app?
3. Pre-seed Startup Stage: Validating the Product
The pre-seed startup is a phase when the entrepreneur requires additional funds to support their startup. For instance, it's highly important to conduct market validation. From this point of view, this stage is key because it provides answers to your questions:
- Is your product something that your customers really need or want?
- If not, how can you pivot? If yes, are there any essential features it lacks?
Editorial guidance. Two of these questions appear in the article text, the rest are added here.
To answer all of them, you need to build a minimum viable product, also known as an MVP, which is a proven tool to validate a startup idea. MVP is a representation of your product with the necessary features to satisfy early adopters.
A minimum viable product gives you a clear sense of where your startup is headed, what to change or add now, and what works well in your product. You can tweak it here and there, to pivot or to drop the idea for good. No matter what the outcome, the pre-seed startup stage helps answer a lot of relevant questions.
4. Seed Startup Stage: First Institutional Funding
The name of the stage speaks for itself. You can imagine a startup to be a seed, which was planted to become a blossoming tree. This stage suggests that you've validated your idea. Your product is already generating revenue on a regular basis and your startup is acquiring new customers. But if you want to grow faster, become bigger, and secure your position in the market, you might want to go for the Seed Stage.
Seed-stage startups start working with investment firms, though individual investors have not left the room. Angel syndicates and super angels write serious checks at this round, often alongside the funds. And business owners can attract investments with the help of these institutions. For example, VCs (or Venture Capitalists) can willingly provide money for startup companies. Moreover, they can provide you with valuable experience in human resources and office space, and even guide you through the next development stages of a startup.
In exchange for funding, they will get some share of your company's equity.
5. Early-Stage Startup: Series A and the Funding Rounds
Early-stage startups are companies that have already figured out what kind of business model works for them. They generate expected revenue, have customers, and attract new ones, but they need to scale to satisfy an increasing market demand. At this stage, they can begin the funding round series.
The early-stage startup stage centers on Series A. Series B usually marks the start of the growth stage rather than the end of this one, though the boundary moves depending on who you ask. During this phase, to attract funds, you need to provide investors with proof that your startup has already had a steady flow of revenue, customers, and a strong business strategy in place.
During funding rounds, early-stage startups can rely on the substantial help of investors to reach new heights, satisfy market demand, or even conquer new markets.
How to launch an app that brings revenue?
6. Growth Stage: Scaling the Startup Business
At the growth stage, companies bask in the glory of their success. Entrepreneurs have some new options for securing the next round of funding — investors and bank loans. Banks provide some good advantages; for instance, they can loan you money at low-interest rates, and they don't require your company's equity in return.
It's a milestone after the ups and downs of launching your business. Now that you've demonstrated a demand for your product or service, it's time to focus on expansion.
Typically, this phase occurs after Series A financing has been secured, followed by Series B and C investments. By this point, your company has proven that it is capable of meeting targets and generating revenue.
The numbers at this stage are larger than most founders expect. According to Carta's State of Private Markets report, the median Series B pre-money valuation sits at roughly $119 million, on a round of about $30 million. Series C sits higher again, with post-money valuations typically between $250 million and $600 million on rounds of $30 to $100 million.
| Round | Typical round size | Typical valuation |
|---|---|---|
| Series A | $10M to $15M | ~$49M pre-money |
| Series B | $20M to $60M, ~$30M median | $100M to $300M post-money |
| Series C | $30M to $100M, ~$60M median | $250M to $600M post-money |
Valuations at these rounds are rising again. Carta reported Series B and Series C pre-money valuations up 17.2% and 12.5% year over year in Q1 2026, with more than 60% of all venture funding going to AI companies over the same quarter.
Want to raise more investment than others? Opt for data science for your startup?
The process of scaling up can be as turbulent as a rollercoaster ride, and it is crucial to remain flexible and avoid rushed decisions. Acting too quickly can lead to setbacks. This problem is faced by around 74% of growing startups.
When focusing on growth, remember the importance of improving your product or service to attract a customer base. Expansion also means expanding your team. It will be necessary to hire people with skills that will support the growth of your business.
As a founder, you can no longer do everything on your own. It's time to entrust others with tasks so that you can concentrate on steering the company in the right direction.
7. Exit Stage: IPO and Acquisition
Your company has several offices, maybe even outside of your country. Your product or service has secured its position in the market so strongly that for now, it has become an integral part of your clients' lives. And now it's time for an IPO or Initial Public Offering. It's the final stage of startup development.
IPO is the very first time when a startup (private company) makes its corporate shares available to the public for purchase.
This allows startups to raise funds from public investors and it means that the company's private status becomes public and its shares become available to an unlimited number of investors. There are several reasons why you might want to consider this option for your startup. An initial public offering helps you attract long-term investment for your business and boost the company's prestige, which provides you with high-profile partners and new clients. IPO allows the existing shareholders to sell their shares or you can sell your shares on favorable terms.
Whatever reasons you might have, you can always go for this option.
Most exits are not IPOs, though. Acquisition is the far more common route. A larger technology company buys the startup for its product, its team, or its customer base, and a private equity firm buys it for the cash it generates. Either way, the deal usually closes faster and quieter than a public listing, and the founders often stay on for an agreed period afterward.
An acquisition also sets a different preparation agenda. Public markets scrutinize financials and governance. A strategic buyer scrutinizes the codebase, the contracts and whether the team will stay.
Find out why outsourcing developers for your startup is right for you with 5 examples.
Startup Product Development Across the Stages
The startup product development process changes shape at every stage, and the mistake founders make most often is building for the stage after the one they are in.
Prototype: Prove the Concept, Not the Product
At the idea and angels stages, a clickable prototype or a demo video does the job. Dropbox validated demand with a three-minute video before building the sync engine.
The prototype exists to show someone what the product will feel like. Investing in production-grade code here usually means rewriting it after the first round of feedback.
MVP: Answer One Question
The minimum viable product exists to answer whether anyone wants this. Features that do not help answer it belong in a later release.
This is where scope discipline pays most. An MVP with fifteen features takes three times as long to build and tells you less than one with four.
Seed Product: Make It Reliable
The product now has paying users, so uptime, support and onboarding start mattering more than the next feature.
Churn at this stage is rarely about missing functionality. It is about something breaking, or about a new user not understanding what to do first.
Scaling: Build for Load, Not for Speed
At early and growth stages, startup software development shifts from speed to architecture. Systems built to test an idea rarely survive a tenfold increase in users without rework.
The usual bottlenecks are the database, the integrations, and anything that runs on a schedule. All three are cheaper to redesign before the traffic arrives than during it.
Technical Debt: The Exit-Stage Problem
Buyers and public markets look at technical debt, security and documentation. What was acceptable in a seed-stage codebase becomes a line item in due diligence.
Some debt is a reasonable trade at the MVP stage, since shipping fast is worth more than perfect code when the idea is unproven. The mistake is never paying it back and finding out what it costs during an acquisition.
When to Use Startup Development Services
Most founders are not engineers, and the stage a company is in decides whether hiring, outsourcing, or a mix makes more sense. Startup development services cover the gap between what the team can build and what the roadmap needs.
At the idea and prototype stage, a startup web app development company can produce a clickable prototype in weeks. Hiring a full in-house team before validation is the more expensive way to learn the same thing.
At the MVP stage, software development services for startups typically cover the build end to end. Custom startup software development matters here when an off-the-shelf tool cannot do the one thing the product exists to do.
At seed and early stage, the question becomes what to keep in-house. Core product usually moves in-house, while startup mobile app development and startup website development often stay with a partner.
At growth stage, a startup development company tends to take on scale work: infrastructure, integrations and the rebuilds that MVP-era code eventually needs. The partnership at this point is usually about capacity rather than capability.
The signal that it is time to bring in outside help is usually a deadline that will not move and a skill the team does not have. A software development startup partner is a way to buy time, not to replace product ownership.
LITSLINK has delivered 1,540+ projects for clients across 82 countries, including startups at every stage from prototype to exit. Our MVP development services and custom software development cover the build, and US-based project management pairs with European engineering talent for easy timezone overlap.
Building a product and need engineering support at your current stage? Contact LITSLINK for a free consultation.
Wrapping Up
We've guided you through the seven startup stages of development. But it should be noted that not all startups should, need, or will follow the same phases. Some young companies stay at the pre-seed stage without moving on, while others sell successfully and start a new venture. Each startup might develop in its own way.
But without proper funding, which is the main way startups survive, you won't last long in the market. You'll have to attract investment at least at the initial stages of startup development.
So, if you're an entrepreneur with a fresh and brilliant business idea in mind and you're looking to get your startup off the ground, you might need some help — with your prototype, minimum viable product, or pitching to investors. LITSLINK is exactly the company that can help you turn dreams into reality. Our expertise accelerates startups on their way to success through the seven pillars of startup development. Take a look at our outsourcing case studies. We've helped a lot of startups make their great ideas come alive, and we can help you build a product that best meets your audiences' expectations!
FAQs
What Are the Stages of a Startup?
There are seven commonly recognized startup stages: idea, friends and family with angels, pre-seed, seed, early stage, growth and exit. Not every company passes through all of them, and the boundaries between them blur in practice.
What Are the Startup Funding Stages?
The startup funding stages run from bootstrapping and friends and family, through angel, pre-seed and seed rounds, into Series A, B and C, and finally to an IPO or acquisition. Each round has a different typical investor and a different expectation of what the company has already proven.
What Is the Difference Between Startup Stages and Startup Funding Stages?
Startup stages describe how the company and its product mature. Startup funding stages describe how it raises money. The two usually move together, but a company can sit in one development phase across two funding rounds, or raise a large round and skip a stage entirely.
What Are the Startup Growth Stages?
Growth stages are the phases after product-market fit, typically covering Series B and C funding, team expansion and market expansion. The focus shifts from proving the product works to proving it scales.
When Should a Startup Hire a Software Development Company?
Usually when a deadline will not move and the team lacks a needed skill. At the prototype and MVP stages, outside help is often faster and cheaper than hiring. At the growth stage, it tends to cover scale work rather than core product.
How Long Does Each Startup Stage Last?
There is no fixed duration. The time between rounds varies significantly depending on product validation, market conditions, and funding availability, and some companies stay in the growth stage indefinitely. Product-market fit drives the pace more than any timetable.
What Is Startup Product Development?
The startup product development process covers everything from the first prototype to a scaled production system. What it involves changes by stage, from validating an idea with an MVP to rebuilding for scale after Series A.
How Many Startups Reach the Exit Stage?
Very few. Most startups close before reaching the later phases, and an IPO or acquisition is the exception rather than the expected outcome. Unicorn status, at a valuation above $1 billion, is rarer still, with just over 1,200 such companies worldwide.
