DEFINITION of 'Development Stage'
A company that is in a preliminary or early state of its corporate life. A development stage company is characterized by its focus on early-stage business activities, such as research and development, market research or construction of manufacturing facilities. Development stage companies are generally underfunded and likely to be on the lookout for sources of capital.
BREAKING DOWN 'Development Stage'
While development stage companies usually have limited revenues and earnings, the prospect of substantial profits in a few years time, makes them attractive investments for risk-tolerant investors. Early-stage companies that can successfully grow their business and graduate to the big leagues over a period of time, are likely to reward their shareholders well. Since a substantial proportion of development stage companies fail, a diversified approach is necessary when investing in such companies.