There are several stages of development that a company goes through on its journey to success. Understanding these stages and knowing where you are can help you navigate the challenges and opportunities specific to each phase.

In this blog, we dive into the details of each stage, what it means, and what metrics you should focus on to propel your business to the next!

Pre-Seed Stage

The earliest phase of a start-up’s lifecycle is the pre-seed stage. This is the idea stage. 

At this stage, you’ve discovered your start-up idea and taken the plunge actually to found the business. Your core activities in a pre-seed stage would include:

• Market knowledge: Pursuing a deeper understanding of your customer needs and behaviours
• Sharpening your idea: Honing your vision to address your audience’s problem better
• A core team: Hiring a co-founder and maybe even the first employees
• MVP: Building an initial prototype of your product or service to showcase the viability 

Funding during pre- seed stage:

Funding during this stage includes approaching pre-seed funding channels like angel investors, crowdfunding platforms, friends, and family to secure the runway till the next stage. The starting number for this can be a few thousand dollars to about USD $50,000. Some angel investors can go up to USD $500,000 too for a pre-seed startup.

It’s interesting to note that pre-seed stage funding is a relatively new concept; previously, pre-seed funding just meant reaching out to friends and family, or taking out loans to get things moving. But lately, startups are proving how quickly they can turn a pre-seed company into a unicorn has allowed an entire industry of Angels, Incubators, Accelerators, and VCs to mushroom and financially support ideas early. 

At the pre-seed stage, investors have very little to go by, so they like to see a founder who is deeply knowledgeable, a reliable team that is driven by a common vision, and a clean track record to help them trust your abilities.

Metrics to focus on to succeed in the Pre-Seed Stage

In the pre-seed stage, it’s best to primarily focus on qualitative metrics and some quantitative metrics, such as:

1. Customer feedback: Gather as much feedback from potential customers as possible to understand their experience, their pain points, and their expectations—measure using feedback forms or 1-on-1 interviews.
2. User engagement: If your MVP is already in test, measure user engagement with Page Views, Click-Through Rate, Social Media Follows/Mentions, and Session Durations with your MVP to assess interest and identify areas for improvement.
3. Product validation: Measure your target market’s willingness to pay for your product or service. These metrics include sign-ups, registrations, downloads, trials, and subscriptions. 

Fin-tech start-up Chexy raised CA$1.3m in pre-seed

An example of a successful start-up in the pre-seed stage is Chexy, Canada’s first tenant-facing payments platform that allows renters to build credit & earn rewards on rent.  In Canada, 3M+ people over the age of 18 are considered ‘credit invisible’. Founded in 2021, Chexy recognized rent as a significant missed opportunity to build credit scores. With an influx of immigrants entering Canada, Chexy started making its mark. They recently secured CA$1.3m in pre-seed funding.

Seed Stage

After the pre-seed stage, you enter the seed stage, which marks the second phase of the growth journey. A stronger validation of the business idea characterizes the seed stage.

Your core activities during this stage should revolve around: 

• Refinement of the business model: Further developing and refining the business model based on market feedback and insights gained during the pre-seed stage.
• Market validation: Continue validating the market demand and customer interest by testing your MVP.
• Initial traction: Generating early adopters, customers, or partnerships to establish a track record of market interest and potential growth.
• Expanding the founding team: Building a capable founding team that shares a common vision.

Funding during the seed stage:

Funding during the seed stage includes approaching seed funding channels like angel investors, VCs, and incubators, for investment to aid launch/growth. Generally, seed funding can be anywhere between USD $500,000 and $2 million. 

Many start-ups meet their fate at this stage when they fail to gain traction even after securing funding. On the other end of the spectrum, we also have startups that don’t need to raise funds after this point because they are able to grow without any further investment.

Metrics to focus on to succeed in the Seed Stage

In the seed stage, you are expected to prove that your hypothesis from the pre-seed stage is bearing fruit and you are, in fact, ready to double down on it and launch/grow, which means your numbers need to start showing up. Focus on key metrics like: 

1. User acquisition: Measure the growth rate of users or customers to demonstrate market the potential for further adoption. Track new registrations, sign-ups, customer acquisition costs (CAC), viral coefficient (referral effectiveness), and attribution metrics (first-touch, last-touch, multi-touch).
2. Engagement metrics: Track user engagement like active users/customers, retention rate, churn rate, frequency of use, feature adoption, CTR, social media interactions, and user-generated content.
3. Conversion rate: Measure conversion rates of trials, conversion rate by marketing channel, and return on ad spend (ROAS) to assess the effectiveness of the product’s value proposition.

Toronto-based Cookin raised CA$17m in seed funding

Cookin, a food delivery app that has brought the homemade-food sharing economy to Canada, recently raised CA$17m in seed funding. They have already proven their model with thousands of downloads and over 2000 applications for home cooks who want to sign up. They are also expanding their team, bringing in talent from Uber, Apple, and Shopify. Cookin intends to use its seed funding to grow further in Ontario and also launch in the US.

Early Stage/Launch Stage

Until now, your product/service may have been doing the rounds in small circles, local communities, industry forums, or known geographies. Now it’s time to open it up and trust that the foundation you’ve laid will carry the product/service to new customers. 

At this stage, your business should be released into the market to gain validation across larger circles/areas. This validation should then inform strides toward growth or expansion. Activities during the early/launch stage typically include:

• Building brand awareness: Implementing marketing strategies to build brand awareness and establish a market presence.
• Scaling user acquisition: Scaling up user acquisition efforts to reach a wider audience and generate more customers.
• Enhancing customer experience: Focusing on improving the overall customer experience to drive satisfaction and loyalty.
• Expanding the team: Hiring additional team members and building functional departments to support growth initiatives
• Iterating on pricing and monetization strategies: Testing and optimizing pricing models to maximize revenue and profitability.
• Product development and iteration: Continuously improving the product or service based on user feedback and market demands.
• Seeking Series A funding: Exploring funding opportunities from venture capitalists to support growth plans. Series A funding can be anywhere between $2 million – $15 million. 

Metrics to focus on to succeed in the Early/Launch Stage:

Growth Stage

The growth stage is an exciting phase because it means you have finally arrived. You are considered an established startup that has achieved product-market fit and is now experiencing a surge in customer acquisition, revenue, and market presence!

The growth stage is characterized by:

• Scaling operations: Developing strategies to scale operations and handle increased demand. This could include optimizing processes, investing in infrastructure, and implementing systems to support growth.
• Customer retention and satisfaction: Prioritizing customer retention and satisfaction to ensure long-term success, even if it means honing your business model or product further to match market needs. 
• Brand building: Invest more heavily in brand-building activities to establish a strong brand presence and differentiate your startup from competitors.
• Talent acquisition and management: Building high-performing teams by attracting top talent and creating a positive work culture. Establishing scalable hiring processes, providing professional development opportunities, and fostering employee engagement.
• Strategic partnerships and alliances: Identifying strategic partnerships, alliances or new opportunities that can help accelerate growth. Collaborating with complementary businesses, industry influencers, or distribution channels to expand market reach.

Funding during the growth stage:

Seeking Series B funding for expansion does not have a lot of upper limits considering you have already proven your business model. Most startups in this stage rarely have to look for funds; you may see a lot of incoming interest from investors. Companies can decide if they want to invest depending on their growth strategy. Series B funding can range from $10 million to an easy $20 million.

Metrics to focus on to succeed in the Growth Stage:

Canadian Super (previously Snapcommerce) successfully secured US$85m in growth funding

Super is a “first-of-its-kind, debt-protecting card” that provides people with rewards and cashback while allowing them to build credit. The company raised its growth funding of US$85m at a stage where it had already surpassed $1 billion in sales, saved consumers $145 million, and netted a revenue of over $100 million with its commerce model previously known as Snapcommerce. When they opened up their credit card product, they garnered a waitlist of 7 million customers! Between 2021-2022, they also increased their employee count from 70 to 200.

Expansion Stage

After the growth stage, you enter the expansion stage. Now an experienced, mature startup in your industry – everything shifts into high gear to scale up, conquer new markets, and solidify your position in the industry.

You would be busy with big things in this phase:

• Market diversification: Expanding into new markets, either geographically or by targeting new customer segments. Identifying untapped opportunities and developing tailored strategies to penetrate these markets.
• Product line extension: Introducing new products or services that complement the existing offerings, allowing the startup to cater to a wider range of customer needs and increase revenue streams.
• Strategic partnerships and alliances: Forming strategic partnerships with other companies in the industry to leverage their resources, expertise, or distribution channels. Facilitating market access, enhancing brand visibility, and driving growth.
• Scalable infrastructure: Building a robust infrastructure capable of supporting increased demand and expansion. Including but not limited to investing in technology, logistics, production facilities, and supply chain management.
• International expansion: Entering new international markets to tap into global opportunities. Developing localized strategies, adapting to cultural nuances, and navigating regulatory requirements to expand internationally successfully.

Funding during the expansion stage:

Series C and above funding is mostly reserved for mature expanding/scaling start-ups with valuations over US $100 million. Companies use these funds to expand to new markets or territories. Just like the growth stage, being an established startup, there is rarely a dearth of funding channels in the expansion stage too. VC firms specializing in late-stage startups, private equity firms, hedge funds, and investment banks would be happy to back your expansion; it really boils down to the best deal for you.

Metrics to focus on to succeed in the Expansion Stage:

Telemedicine start-up Maple scales to new markets with acquisitions and by increasing the breadth of services

Maple is a digital healthcare platform that enables patients to connect directly with medical care specialists on their phones or computers. Founded in 2017, Maple is considered one of North America’s fastest-growing companies and Canada’s leading virtual care platform. They have served over 4 million patients. Maple has been expanding their market footprint by acquiring companies like Wello – a Calgary-based company that also provides virtual care. This acquisition will add approximately 350 new corporate clients to Maple’s roster. Maple also chose to branch into the mental health space with Mind by Maple, which offers comprehensive mental health services. 

Additionally, Shoppers Drug Mart invested CA $75 million for a minority stake in Maple. This partnership facilitated the development of new healthcare programs and enhanced in-person and virtual healthcare services.

Exit Stage

The exit stage of a start-up’s journey is not necessarily required. Many startups have goals that aren’t focused on exits. Many want to be long-term, high-value companies. 

However, for those who are in this stage or would like to see themselves in this stage, the exit stage involves preparing for a significant liquidity event, such as an acquisition, initial public offering (IPO), or merger. 

During this stage, the focus shifts from growth and expansion to maximizing value for investors and stakeholders. Start-ups in the exit stage aim to attract potential buyers or investors while ensuring a smooth transition for their customers and employees.

You can expect the following from this stage:

• Financial Optimization: Maximizing profitability and financial performance to increase the company’s valuation.
• Market Positioning: Solidifying the company’s competitive position and demonstrating sustainable growth potential to attract potential buyers or investors.
• Due Diligence: Conduct a thorough assessment of the company’s operations, financials, legal aspects, and intellectual property to prepare for the exit process.
• Preparation for liquidity event: Engaging in activities to maximize the company’s value and attractiveness to potential buyers or investors.
• Negotiations and deal structuring: Negotiating with potential buyers or investors to achieve a favourable deal structure and terms.
• Transition planning: Develop a transition plan to ensure a seamless transfer of ownership, maintain customer relationships, and support employees during the transition.

Metrics to focus on in the Exit Stage:

1. Valuation: Monitoring the company’s valuation and ensuring it aligns with industry benchmarks and investor expectations.
2. Revenue and Profitability: Demonstrating consistent revenue growth and sustainable profitability to increase the company’s attractiveness to potential buyers or investors.
3. Market Share: Evaluating the company’s market share and growth trajectory compared to competitors, showcasing its position in the market.
4. Investor Returns: Tracking the return on investment for early-stage investors to provide evidence of the company’s growth potential and value creation.

AbCellera Biologics – the largest-ever IPO for a Canadian biotech company

Founded in 2012, AbCellera is a Vancouver-based drug discovery platform that searches and analyzes immune systems. AbCellera has executed 4 strategic acquisitions in its lifetime to expand and scale, one of them being San Francisco-based Trianni for $90 million USD. The acquisition was followed by a CA$144 million Series B funding round. 
In 2020, AbCellera set out to raise $200 million through their IPO, but because of their much-anticipated success, they increased the size of their IPO 3 times. Finally, within minutes of listing on the NASDAQ, the stock price tripled from its IPO price of $20 per share to over $70, pulling in gross proceeds of $555.5 million.

Want to start up in Canada?

TBDC is the bridge you’re looking for! We are Canada’s premier startup incubator. Successful companies like Ibentos and Ayottaz have graduated from our programs and scaled through North America and the world. Are you ready to do the same and make your mark? To learn more, click here.