Startup Stages Explained

Posted 3/9/2022 in Learn by Jen Lyons

The word “startup” is ubiquitous–and it doesn’t always mean the same thing. Most up-and-coming businesses are defined as startups, whether the business is a single person bootstrapping from their basement or a company with thousands of employees that’s secured tens (or hundreds) of millions in funding. Here’s an explanation of startup stages to help you evaluate the funding and maturity of a company.

When you’re interviewing for jobs–or referring people to a startup–how do you know what’s what? How can you find a startup operating in the stage, and which skills would be a good fit? 

In the world of startups, there are no hard and fast rules (that’s what makes startup life so exciting!), but here are a few general definitions to use as guideposts for startup stages. 

Defining startup stages

Most startups define their stage by funding round: Seed Round, Series A, Series B, etc. Each round represents when the business is asking for outside investment to grow and scale. But there’s also more to each round than just the dollars and cents. Here are the core milestones for funding, product maturity, and hiring.  

Pre-seed: Turning an idea into a business

The pre-seed stage of a business is the very beginning. In this stage, founders have an idea for a business and are working out the details of their business model, yet they’re too early to attract the attention of a venture capital firm. At this stage, businesses rely on self-funding, friends and family, and the advice of established startup founders. 

At this early stage, analysis and research are paramount. Founders ask themselves tough questions: Is my solution the correct answer to the problem? Is this marketplace too crowded? What is the opportunity cost? 

As far as hiring goes, it’s unlikely that many roles will be available at this early stage, where the founders themselves complete most work. 

Seed stage: Showing potential / Proof of Concept

Companies in the seed stage are working toward a core MVP – minimum viable product. A minimum viable product is the earliest version of a product that founders are willing to pitch to investors. According to Madrona Venture Group, on average, companies close seed round funding 1 year and 9.6 months after their founding date. Some companies may have sold their product, perhaps in a beta format, but many haven’t. However, they have concrete learnings and market research to prove their worth to investors. Investors at this stage include angel investors, incubators, early venture capital investors, and more common at companies with a consumer product, crowdfunding. 

At this stage, the founding team is still in place, along with some initial hires who have gotten in on the ground floor. Roles at this stage include product, strategy, and operations. The seed-stage can be both an exciting time to join, and a volatile one, as not all startups in the seed stage end up securing the funding they need to move forward. 

Series A: A solid business strategy 

Series A stage is typically the first round of venture capital financing. Startups in this stage are iterating on a reliable product and adding new features. They can tell potential investors how they’ll scale and go to market. According to Madrona Venture Group, on average, companies close series A rounds 1 year and 10.5 months after their seed financing. 

In addition to pursuing serious funding, startups in this stage are focused on laying the groundwork for scalability and fine-tuning their product/market fit. 

If you join a startup in the Series A round, you will likely be joining an established core team growing quickly. Depending on the product, typical hires in this stage include marketing, sales, finance, and operations, as venture capital firms want to see the company establishing a solid customer base. 

Series B: All about scaling

When a company is ready for the second round of venture capital funding, it’s all about scalability. Companies pursue significant capital investments to fund operations, significantly grow their team, or move into new lines of business. In this stage, venture capitalists look to fund well-established startups with proven performance, and a tested and trusted business model.

With scaling comes hiring. At this stage, successful startups are hiring like crazy. Expect to see multiple open roles with well-defined, goal-driven job descriptions. Typical roles include sales, marketing, and customer success. 

Joining a company in this phase can be a smart move, as it’s less risky than joining an earlier-stage startup, yet there are often still plenty of opportunities to make your mark and establish expertise in your area. 

Series C and beyond: Accelerating the business 

Each additional round of investor funding for a company works through the alphabet–Series C, Series D, et cetera. Companies pursuing Series C funding are considered late-stage startups. They may be searching for serious funds to meet big goals like building and scaling completely new products, expanding internationally, or acquiring other companies. At this stage, companies can attract large investors like private equity firms, hedge funds, and banks. 

If you join a company in Series C or beyond, it may feel more like working at an established organization and less like a traditional startup. There will be defined goals in place regarding customer acquisition and revenue. The upsides can include job security and stability. 

Some early team members–those who crave working in the exciting land of early-stage startups-may be departing at this stage. For job-seekers, that means you may backfill a role; instead of landing a new position.

The Mezzanine Stage: Reaching maturity 

In this last stage of venture funding, companies who have reached what’s commonly called the Mezzanine Stage are reaching a turning point. Also called the Bridge Stage or the Pre-Public Stage, these companies are full-fledged, viable businesses. At this point, early investors may sell their shares, and companies may be pursuing an IPO or looking to be purchased by another company. 

The Mezzanine Stage is an exciting time to join a company, but one that requires some patience and flexibility, as mergers, acquisitions, and going public can influence leadership changes and  the way the business operates.

If you’re interested in connecting your network to exciting open roles at startups, signup to be a referrer today! The candidate platform allows you to refer your network to open roles and earn a reward if they’re hired.