

Ask News.YC: Should You Implement Your Business Model at Launch? Joe Kraus vs Paul Graham - staunch

Any time two people who know a ton about startups seem to differ there's something interesting to think about.<p>Joe Kraus&#62; Put your business model into beta when you put your product into beta.<p>Paul Graham&#62; The reason we tell founders not to worry about the business model initially is that making something people want is so much harder.<p>I've run into this myself. With my new project advertising is a hassle to manage, so much so that I've considered not having ads at all at first. I'm concerned that not having ads initially and then adding them later would result in users feeling as though I used bait and switch to trick them.<p>It seems to me that if your business model impacts the product directly it may be necessary to implement it at launch. I think that's what I have to do at least.

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SwellJoe
I think you're misinterpreting Joe Kraus. I've seen him do his "Startup
Addict" presentation twice now, once at Startup School and once at a YC
dinner, and in neither instance did I come away with the impression that he
meant you have to start making money immediately.

The meaning I took from this "business model in beta" statement was, "you have
to be willing to admit you don't understand how you're going to make money; be
willing to evolve the business model based on what you learn after launch".
Which seems entirely consonant with what pg has said.

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staunch
Quite possibly I am. I thought he was saying this after not releasing his
premium account types for JotSpot initially and getting different feedback
than he would from people actually willing to pay.

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SwellJoe
I'll buy that, too.

Anyway, I think the "beta" aspect of that statement is "try it and see, and
change it if it's wrong". If your business model is "everything is free and I
hate ads", then you'll soon find out that it's wrong. ;-)

It also ties into Kraus' favorite saying: You make what you measure.

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sharpshoot
Time to bring in some reid hoffman logic:

The order at which you deploy features should prioritised as follows:

a) User acquisition b) User retention c) Monetisation

pg states makes something people want first, which covers a and b then figure
out c. If you plan to charge for your product you have to consider which
features people would pay for and not give them away for free initially as you
will not be able to charge for them later.

If you don't want to charge directly - then focus on building the user base
and you'll have an audience which you can figure out from what would keep them
and let you monetise through advertising. Generally in consumer ad plays focus
on reaching and keeping users first, as you'll be able to sell advertisers on
that.

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jdavid
We are doing our business plan in beta during our product launch, for a few
reasons.

1\. its defining our feature set 2\. as software folk, we are still learning
about business, and its easier to walk first, and then run 3\. we need the
money now, we don't have valley funders to give us gobs of money in Milwaukee,
WI. I think the state tracked 3-5 million here last year in angel funding. 4\.
our evaluation will be higher with revenue and on the ground business
knowledge.

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davidw
You already posted about this once before. My strategy has been to start with
small, unobtrusive ads, just to get people used to the fact that, yes, there
are ads. You can also get some idea of how much money a few small ads will
generate.

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steve
Decisions...

