AICPA Stage** 

Operational Development 

Typical Financing 

Valuation Approach Typically Applicable 

1 

No product revenues to date and limited expense history, typically an incomplete management team with an idea, plan, and possibly some initial product development 

Seed capital (common stock) 

Asset-based 

2 

Still no product revenue but substantive expense history, as product development is underway and challenges are thought to be understood 

1st & 2nd rounds (preferred stock) 

Asset-based 

3 

Significant progress in product development; key development milestones met and development is near completion, but generally no product revenue 

3rd & 4th rounds (preferred stock) 

Market (maybe income) 

4 

Additional key development milestones met and some product revenue, but still operating at a loss 

Mezzanine rounds (preferred stock) 

Market, income 

5 

Product revenue and operating profitability or breakeven/positive cash flows 

IPO or other liquidity event (common stock) 

Market, income 

6 

Established financial history of profitable operations or generation of positive cash flows 

IPO or other liquidity event (common stock) 

Market, income