WhatsApp made it big without a business model. Why should I make one?

WhatsApp, Twitter, Facebook all started life without a business model, and they all made it to greatness by building a huge subscriber base via network effects over time. So why shouldn't you do the same: Don't worry about making money, just grow the subscriber base until it is huge, and then figure out how to monetize the install base?

The inconvenient truth is that these companies are all outliers in the land of startups.  Most startups work their way to greatness over a period of 5 to 10 years through hard work, perseverence, and constant iterations based on market feedback.  If you start out with no business model, you are basically ceding the first couple of years of potential business model iterations to the competition.  Why lose that incredibly valuable opportunity to learn from the customer when you have a small and loyal install base that will work with you as you try new things? 

Our recommendation to startups is always the same: Come up with a hypothesis for a business model from Day 1, and then get out of the building as quickly as possible and start to test and iterate it in the field. That is usually the most cost-effective way to lead you to a scalable and repeatable business model while spending the least possible elapsed time.

Was this article helpful?
1 out of 1 found this helpful


      This website and all posts and content are intended for educational purposes only and for no other purposes. This website does not and is not intended to provide legal, financial or tax related advice. Although we take great care to make sure that all of our information is accurate and useful for it intended educational purposes, if you have a specific issue for which you need actionable advice, please come to the Martin Trust Center in person to speak to one of our Entrepreneurs in Residence (EIR) or consult a licensed attorney or other professional. Despite the backgrounds and qualifications of our staff, mentors, lecturers, authors, EIRs and speakers no attorney-client, advisor, or other confidential/privileged relationship exists or will be formed between you and the Martin Trust Center or the Massachusetts Institute of Technology. Under no circumstances should any content be relied upon in making any decisions that could have any financial or legal impact(s).
Have more questions? Submit a request

Comments

Powered by Zendesk