The Startup Levels: A Framework That Helped Us Focus
[At our company,] we adopted this concept we call internally the Level 1, Level 2, and Level 3 startup…
I originally came across the concept of micro startups and “levels” doom scrolling one day. The idea, as the video stated, is to imagine where you wanted to be in five years and work backwards and build the startups that would get you there. Each level contains a goal that aims higher than the previous one and, as a result, also requires a higher skill set level. For the life of me, however, I cannot find the original video nor remember it enough to quote it properly. (If you do, please send it my way!)
Since then, we adopted and amended this concept we call internally the Level 1, Level 2, and Level 3 startup. Theoretically, you can continue to go higher in levels; however, for our purposes and current vision, we have identified three levels.
Level 1: Build Something That Works
This is where most great companies begin—not with a bold mission statement, but with a clear pain point.
In Level 1, identify a niche you understand deeply. You know the problem. You’ve lived it. You can articulate it better than your customer can. And because of that, you can build something that serves a real, immediate need. The unknowns at this stage are limited to the basics of running a successful startup and reduce the heavy burden of marketing research, stakeholder consultations, product designs, and more.
The goal here is to get to $1M in yearly recurring revenue (YRR). Not because that number is magical, but because it gives you proof that the product works, people want it, and you’re capable of solving problems in the real world. Once you hit that mark, you’re ready to graduate to Level 2.
Level 2: Build Infrastructure, Not Just Products
Ideally, using the skills gained in Level 1, you expand your goal to a more meso level problem in your niche or area.
For example, if you built a task manager for founders with ADHD in Level 1, you would perhaps look to develop an internal OS for neurodivergent teams to optimize how they communicate, build, and collaborate in Level 2.
The challenge here isn’t just “does this work?”, it’s “how do I make this work at scale, for teams, systems, or institutions?” The goal here is to reach $5M in YRR in order to graduate to Level 3.
Level 3: Build the World You Want to Live In
The fun stage. Why founders do it. This is where you go all out on the crazy ideas that change the world. Here you may look to tackle system level or global problems reimagining
- security,
- the education system,
- the workplace,
- or something no one’s dared attempt yet.
There is no set criteria to graduate for this level, you may choose to remain here until the end.
I find this concept really powerful and helpful for any founder and entrepreneur. The hardest part of the journey is saying “No” to attractive news ideas and remaining focused. Now, at Level 1, whenever we’re on call or working together and come up with a creative new idea it gets placed in the appropriate level archive to be revisited at a later date. Not deleted, just shelved until it’s appropriate.
All that said, this is by no means a law that must be followed, nor a successful blueprint I am sharing. Only a concept we found helpful internally to keep us on track. You may choose to adapt this level system to your company.
Furthermore, the graduation criteria may look different for you and your startup. For us, our goal is to build a safety net that can take care of life’s essentials such that we can then tackle Level 3 problems worry-free of family and life needs. That’s our real graduation criteria.
The neat thing is that this could be applied to the same startup and iterations of where you want to build towards—Apple I, Apple II, Apple III, Lisa, Macintosh, until present. The idea is that each version is a step closer to the thing you're really trying to build. And sometimes, knowing which version you're building is the most powerful clarity you can have.