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Why most startups die at 40+ people?

Why most startups die at 40+ people?

In the past few years, there has been a proliferation of books, articles, and blogs about startups. It is quite easy to find case studies about large companies. But, very few attempts in providing  a roadmap to manage the development of a start-up into a bigger business are available.

Steve Blank, entrepreneur-turned-educator, is credited with launching the Lean Startup movement and teaches at Stanford, Columbia, Berkeley, and NYU.

SEE ALSO : Korea needs to draw long-term growth plan for startups

Steve has described the 4 phases of a startup development into a larger business:

1. Search phase 

In this first step, the goal of a startup is to search for a repeatable and scalable business model. It typically takes multiple iterations and pivots to find product-market fit or the match between what you’re building and who will buy it.

Company size is typically less than 40 people and may have been funded with a seed round and/or series A.

You will realize you’re ready to exit the Search step when you have customer validation.

Most startups die before reaching phase 2.

2. Build phase

This Build phase typically begins with around 40 employees and will last to at least 175, and in some cases, up to 700 employees. Venture-backed startups will often have a series C or D funding or later rounds during this phase.

Now, the organization needs to put in place culture, training, product management, and other processes and procedures (i.e. writing the HR manual, sales comp plan, expense reports, branding guidelines, etc.).

SEE ALSO : Alibaba to lead $1b round into Chinese food delivery startup

3. Grow phase

In the Grow phase, the company has achieved liquidity or an IPO or has been bought or merged into a larger company event and is growing by repeatable processes. The full suite of process and procedures for key performance indicators (KPIs) are in place.

4. Time to make new friends

At this stage you need an advisory board. If you already had an advisory board (formal and/or informal), add CEOs who have been through this phase. If not, start one.

Get a one-to-one CEO coach or join a CEO peer group.

And potentially the most difficult, think about upgrading his board by transitioning out board members whose expertise was solely rooted in the Search phase.

(Source: Tech in Asia)