At any one point in time, a project exists in one of four states. These states determine what we focus on to advance it to a later stage. Transitioning to the next stage is conditioned on meeting specific and measurable conditions.
IDEA > PRODUCT > REVENUE > PROFIT
Idea Stage. Identify a problem that we want to see solved. Identify a community of users with that problem. Talk to those users to confirm that the problem is real and painful for them. Explore with them possible software solutions to the problem. Exit this stage when we have built an initial minimum viable product that implements the core logic of one solution.
Product Stage. Iterate on the MVP to get user traction. Continously talk to users to see where the product falls short of their needs and expectations. Exit this stage when we have three months of recurring revenue from one customer.
Revenue Stage. Sell to customers who look like the existing customers and belong to the same communities. Find distribution channels where these users work. Exit this stage when income exceeds the expense of producing the product.
Profit Stage. Continue to grow existing markets and enter adjacent markets to increase free cash flow.
The decision to spin-out a project into a stand-alone business is independent of what stage it is in. We could spin-out a project as early as the idea stage if there were structural reasons to do so. Reasons for this might be to form a joint venture with one or more partners, or to exit the business altogether. On the other hand, there is nothing to say that a highly profitable business can't remain under the studio umbrella until there is such a reason to spin it out.