The 3 Stages of Startup Growth: Stage 2 — Foundational

business growth growth journey learning & development Dec 17, 2022

If you’re here, you may have already read this post, outlining the 3 stages of startup growth. If you want to take a minute to go there and read through it, I’ll wait ;). 

In that blog, I provided an introduction to the 3 stages to help founders better identify where they stand and tackle pressing issues that arise (which are common to startups in that stage). In this post, I’ll dig a bit deeper into Stage 2 startup growth, which is called the Foundational stage, to help you pinpoint challenges and areas that may be holding you back from growth. 

Key characteristics of Stage 2 startups

Congratulations on making it to Stage 2! Stage 1 is not an easy place to be, with a great deal of uncertainty. If you’ve made it this far, your priorities are probably in the right place, and you’re enjoying the fruits of your labor in those early days and years. Stage 2 startup growth is extremely exciting.

In Stage 2, your startup…

> Has grown beyond you — by now, you have probably added a few key hires or partners

> Relies less on you for day-to-day operations (ideally, you’re only involved in about 50% of the day to day)

> Has documented key processes and created infrastructure that empowers you to continually add new hires and grow

> Generates revenue that is between $200k and $2 million annually

Stage 2 is a pretty exciting place to be. Things are very different on a day-to-day basis once you start bringing in strategic hires to take on some of the tasks that keep you from focusing on the big picture. 

Priority focus areas for Stage 2 Startups

Successful Stage 2 startup growth means focusing your energy and resources in these key areas:

Establishing clear, measurable goals and objectives for the company. Arbitrary goals aren’t going to get you to the next level — set them, and ensure the entire company is aligned around these goals.  

Defining key financial metrics. At this point, the smallest details that may have been easy to ignore (or at least de-prioritize) in Stage 1 become critical to long-term success in Stage 2. In particular, you should understand the true cost of acquiring customers, how much it costs to retain your customers and the lifetime value of your customers. Identifying these core metrics will drive future investment decisions and understand the health of your business.

> Investing in content marketing. It is NEVER too early to invest in content marketing. This powerful tool will rev up your demand generation, and if done correctly, can dramatically accelerate growth. 

Documenting key foundational workflows, including lead management and your sales process. It’s also important to track key metrics in these areas.

Documenting job expectations and objectives for your first hires. Adding your early employees is a major step, and doing so correctly will ensure that as you add more talent, onboarding and contributions happen seamlessly and successfully. It can be VERY challenging to go back and retroactively improve upon these elements, so define them as early in Stage 2 as possible. 

The key threshold for Stage 2 startups

In my experience, 90% of startups get stuck at Stage 2. This is due to FoundersCapacityTM. Your business is growing, but you’re struggling to scale while preserving the quality of your product, service and/or customer experience. 

Some businesses can adjust to this on the fly, but most don’t take action until they stall. It’s critical to take action as soon as possible to reignite growth and move to the next stage of startup growth. 

What’s holding back your Stage 2 startup? 

If you’ve hit FoundersCapacityTM and are struggling to overcome it, I can help. Shoot me a message through my website and let’s connect.