A startup is a company built to grow fast while it searches for a repeatable, scalable business model; a small business runs a proven model and grows steadily.
Its stages: pre-seed (idea and prototype), seed (product and first sales), Series A (proven demand), rounds B and C, and an exit: a sale or IPO. Each stage has its own investors.
Many first-time founders think a startup is only the initial stage of turning a business idea into reality.
It is not: a startup begins when the idea is born and continues until the company becomes a sustainable, scalable business or reaches an IPO. The path has many stages, each with its own features and goals.
Founders often get confused by the terms, and not always for lack of knowledge: there is no single classification of stages.
Different experts and companies call the same stages by different names.
Below are the main stages, their names, what investors expect at each, and who invests — including in Spain.
Startup stages in one table
| Stage | What the project has | What the money is for | Who usually invests | What investors expect |
|---|---|---|---|---|
| Pre-seed | Idea, concept, prototype | Testing the idea, a prototype, first tests | Founders, friends and family, business angels, accelerators | A team, understanding of the problem, first signs of demand |
| Seed | A working product, first sales | Market entry, marketing, refining the product to break-even | Business angels, early-stage funds, grants, ENISA loans | Traction: paying customers, growth, retention |
| Series A | Proven demand (product-market fit), revenue | Scaling to the mass market | Venture capital funds | Steady revenue, working unit economics, scalability |
| Series B, C and beyond | A working business, growing market share | New regions, products, capacity, acquisitions | Growth funds, corporate investors | Efficient growth, market leadership |
| Exit | A mature company | Liquidity for founders and investors | A strategic buyer or the stock market | Predictable results, transparency |
What a startup is, in plain words
A startup is a company designed to grow fast that has not yet settled on a business model able to carry that growth.
Paul Graham, co-founder of the Y Combinator accelerator, boils the definition down to one word: growth.
Steve Blank, who created the customer development method, calls a startup a temporary organisation searching for a repeatable and scalable business model.
Temporary, because once the model is found, the startup turns into an ordinary company.
Age, technology and venture money do not make a company a startup on their own.
A newly founded firm is not automatically a startup, and a startup does not have to be a tech company.
What matters is whether the product can reach ever more customers without costs rising at the same pace.
| Startup | Small business | |
|---|---|---|
| Business model | Still searching and testing hypotheses | Known upfront, works within months |
| Scalability | The product can be sold almost without limit: software, a platform, a technology | Limited by location, the owner’s time and headcount |
| Early-years goal | Fast growth in revenue and market share, often at a loss | Profit and a steady income for the owner |
| Funding | Business angels and venture funds, in exchange for equity | Own funds, bank loans, leasing |
| Risk | High: the model may never be found | Moderate: others have already proven the model |
| Investor return | An exit: a sale of the stake or an IPO | Dividends |
Signs of a startup:
- the product scales — revenue can grow faster than costs;
- the business model is not yet proven and the team is testing hypotheses;
- the goal for the first years is growth, not profit;
- money is raised for equity, not only as debt;
- it is built on a new product, technology or way of selling.
Three illustrative examples:
- A café in Valencia is a small business. The model is clear from day one, and growth is capped by seats and neighbourhoods.
- An online booking service for thousands of cafés across Europe is a startup. Each new customer costs almost nothing to serve, but the team is still working out who will pay and how much.
- An accounting firm is a small business. If the same team builds software that automates bookkeeping for autónomos and sells it on subscription, that is a startup.
A startup stops being one when it finds a working model and moves from search to execution: the market, customers, channels and pricing are known, and the job is to scale.
Spain also has a legal definition. Under the Startups Act (Ley 28/2022), an empresa emergente is a company with an innovative project and a scalable model, as certified by ENISA.
It is based in Spain, has never paid dividends, is not listed and employs at least 60% of its staff in Spain.
The status ends 5 years after registration (7 in biotech, energy, industry and other strategic sectors), once annual turnover exceeds €10 million, if the company is bought by a non-startup, or when it lists on a stock exchange.
Pre-seed
Investment at the idea stage. Founders usually get through it with their own money, join an accelerator or bring in people they know. Pre-seed has two phases:
- Concept — the idea is written down on paper or digitally. The product does not work yet and has not been tested on the market; the concept may rest on assumptions and conversations with potential buyers.
- Prototype — the idea becomes a working product that can be shown to buyers.
What to prepare at this stage: Why startups need a concept and How to start a startup from scratch.
Seed round
The product already exists, and the money goes into market testing and marketing. This is investment in a validated business model hypothesis.
The product most likely has a ready prototype and first sales, needed to test different go-to-market options and find the best route to rapid scaling.
In this round the prototype is developed into a serious product, and funding is sized to take the business to break-even. Seed phases:
- working prototype;
- alpha;
- private beta;
- public beta.
The main argument at seed is traction: first paying customers and growth.
Series A
The company has proven market demand (product-market fit) and uses the money for growth and scaling. Series A is meant to start scaling the product for the mass market.
Revenue growth, reaching profit and expansion are financed quickly, usually because of competitive threat or confidence that a significant market share can be won. Series A phases:
- putting the project into operation or the product into production;
- launch, or early startup stage.
To raise a Series A, the unit economics must work: a fund will not scale a loss-making model.
Later rounds: B, C, D and beyond
They usually have no single specific goal and most often target international expansion, new markets or new products. These rounds cover:
- startup stage;
- first clients, or late startup stage;
- growth stage;
- expansion stage.
Series B (business expansion) is investment to enter global markets.
Further rounds may follow as needed — to scale production significantly or before a sale to a strategic investor. Usually this means taking the business model to new regions.
Exit and IPO
An IPO (initial public offering) is the first public sale of a company’s shares to an unlimited number of people, including through depositary receipts.
The company can sell many shares on the stock exchange at once, and anyone can buy them; the owners no longer have to approach investors one by one.
After an IPO, founders and investors can sell their shares or increase their stake. An IPO is a liquidity event: shares in the company become easily convertible into cash.
An IPO is not the only exit. Far more often a startup is sold to a strategic buyer — a large company in the sector — or to a fund.
How to prepare a business for sale: our Preparing a business for sale service.
How much is raised at each stage
Articles on stages often quote typical round sizes, but those figures date quickly and vary greatly by country, sector and year: what counted as a Series A a few years ago can be a seed round today.
It is more reliable to look at recent deals in your sector and region — in databases such as Crunchbase and Dealroom — and to calculate the amount from the project’s needs.
How much money you need is shown by the financial model: a round should cover the plan to the next milestone with a margin.
Startup stages in Spain
- Pre-seed and seed: business angels and their networks, accelerators (Lanzadera, SeedRocket, Wayra), grants and CDTI’s Neotec grant for technology projects.
- Seed and growth: ENISA loans without collateral (€25,000–1,500,000) often come alongside investor money.
- Series A and beyond: Spanish and European venture capital funds — brought together by the SpainCap association.
- Empresa emergente status under the Startups Act is available to companies up to 5 years old (7 in strategic sectors) and gives 15% corporate tax for four years.
More in Startup support programmes in Spain and How to find an investor for a startup.
How to structure an investor’s entry at each stage — equity, a convertible loan or a SAFE: How to structure startup investment in Spain.
An extended classification
A more detailed breakdown is sometimes used:
- initial stage;
- pre-seed stage;
- seed stage;
- prototype;
- working prototype;
- alpha;
- private beta;
- public beta;
- putting into operation or production;
- launch, or early startup stage;
- startup stage;
- first clients, or late startup stage;
- post-startup stage;
- growth stage;
- expansion stage;
- exit stage;
- pre-IPO (for an IPO exit);
- IPO.
This structure helps startups and investors understand where the company is and what comes next.
The classification described above is one of the most common in venture capital: pre-seed, seed, Series A and later rounds are the standard in most cases.
Other stage classifications
- The classic venture model: pre-seed, seed, Series A, B, C and so on up to IPO.
- Lean Startup: customer discovery, customer validation, customer creation and company building.
- Accelerators and incubators: their own stages, such as bootcamp, mentorship, demo day and post-acceleration.
- The product life cycle: development, introduction, growth, maturity and decline.
Frequently asked questions
What is a startup, in simple terms?
A company that does not yet know exactly how it will make money but is built to grow many times over once the model works. The defining trait is not age or technology but a bet on fast, scalable growth.
How is a startup different from a small business?
A small business repeats a known model and usually earns money within months, but its growth is limited by location and the owner’s time. A startup tests a new model, accepts losses for years for the sake of growth and raises money from angels and funds for equity.
When does a startup stop being a startup?
When the model is found and the company shifts from searching to scaling. In Spain there is also a formal line — losing empresa emergente status: after 5 years (7 in strategic sectors), once turnover tops €10 million or after a stock market listing.
What are the stages of a startup?
The main ones: pre-seed (idea and prototype), seed (product and first sales), Series A (proven demand and scaling), later rounds B, C and beyond (new markets and products) and an exit — a sale or an IPO.
How is pre-seed different from seed?
At pre-seed there is an idea or prototype and the money goes into testing the idea. At seed the product works and has first sales, and the money goes into market entry and marketing.
What is product-market fit?
Proven fit between the product and the market: customers buy, come back and recommend it, and growth does not rely on advertising alone. It is the condition for a Series A.
How much money is raised at each stage?
Amounts depend heavily on country, sector and year and change quickly. Look at recent deals in your sector in databases such as Crunchbase and Dealroom, and calculate the amount from the project’s needs to the next milestone.
How do I know what stage my startup is at?
By what you already have: only an idea — pre-seed; a working product and first sales — seed; steady revenue and proven demand — Series A. An independent view of stage and readiness comes from a project viability assessment.
Key points about startup stages
- A startup differs from a small business not by age but by searching for a new business model and betting on fast, scalable growth.
- A startup goes from idea to sustainable business or exit, and there is no single classification of stages.
- The venture market standard: pre-seed, seed, Series A, later rounds, exit.
- Each stage has its own investors and expectations, from team and idea to revenue and unit economics.
- Round sizes date quickly — check recent deals and calculate from the project’s needs.
- In Spain, angels, accelerators, Neotec and ENISA help early on; venture funds later.
Understanding the stages is key for any founder: each requires its own resources, strategies and approaches.
For an independent view of where your project stands and what the next stage needs, see our project viability assessment.
