This chart is useful in understanding the correlation between a startup company's evolution through the various stages and the cashflow expectations from investors at the various stages. In addition to highlighting the expectations with each stage, we will also explain the risks for companies and investors at each stage and the infamous Valley of Death period. Let's start with the stages. The primary goal or purpose of the pre-seed to seed stages of a startup is to take an idea or concept, introduce it into the market, and through multiple iterations or refinements, ultimately validate the business model or proof of concept as it is sometimes referred to. There are a couple of terms that are used in the VC industry to determine the success of a company during the seed stage, specifically minimum viable product or MVP and product market fit, or PMF. It is during the seed stage that a startup will have launched its MVP and found PMF. So what do they mean? An MVP is a version of a company's product introduced to a specific target market that is both functional and viable. A minimum viable product is not complicated with multiple features or options. It is a straightforward solution to a problem or a demand in the market that was developed with as little risk or cost as possible. The purpose of the product is to satisfy early adopter customers and learn from their feedback or response how to refine and improve their product. PMF describes the scenario when a company's product or service addresses or solves the needs of a target customer base or enterprise market, or in other words, there is a good fit between the product and its target market. Product Market Fit VC investors will look to certain metrics to prove PMF specifically that the market is buying and using repeatedly the product or service, and that the metrics point to growing and improving traction in a large and profitable market.

It is not always the case that a company's first MVP is immediately accepted in the market or that PMF occurs in the hockey stick like growth trajectory shown. This period can be difficult for entrepreneurs to navigate. It can take longer and can burn cash faster than anticipated. And even when a product reaches market acceptance, it may not yet be generating the revenues needed to sustain growth, and it may not yet have the metrics to validate or prove PMF to series A investors.