Why a Feature isn’t a Business
I’m a business model geek. That’s why it makes me crazy when founders talk about having multiple (many like five or six) revenue streams or only talking about their model when it is at scale. I know you have a vision for what your business can be in the future when you have 1M users. But you better figure out what you need to do in order to get to that bright future.
I don’t know if you saw the news this week about Zaarly on TechCrunch. After a big hope (hype) of Disrupting the Global Economy by creating a Craig’s List for Buyers to list what they want to buy and raising $14M in capital from brand name VCs, they shattered their original business model and are launching storefronts for merchants (Etsy) with e-commerce (Shopify).
The original listing service for buyers was a feature, a feature that was focused on buyers. It was a feature that may work in the future when there is a marketplace of sellers and buyers. The business also required that they have storefronts, e-commerce. Acquiring buyers in a marketplace that has no sellers is incredibly difficult.
Don’t get me wrong. It was an ambitious goal and was worth swinging for the fences. Big ideas are often polarizing. If someone doesn’t hate the idea it’s likely not a big idea.
The Zaarly team was able to sell people on that vision and raise the capital. I hope the new model is successful and they have a great return for their investors. The question is what can YOU learn from it? Assuming you don’t have $14M in personal cash burning a hole in your pocket that you can spend to get to scale?
There are two reasons to list multiple revenue streams at your launch:
- You don’t know what your business model is – so you’re casting about trying to pick one that you hope investors will find interesting.
- You’re thinking about what your business could be when it gets to scale and not focused on what you need to do in the short term to drive revenue to get to scale.
Pick your lead revenue model and go test it out. The faster you talk to prospects and real “customers,” the faster you will learn what will help you get from your idea stage to scale.