
Revenue could be fatal: 3 reasons your startup should consider waiting - rrwhite
http://www.uservoice.com/blog/founders/revenue-could-be-fatal-3-reasons-your-startup-should-consider-waiting/
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zmanji
This is the stupidest drivel I have ever read. If you brought this up outside
of the inane SV bubble, you would be laughed out of the room.

They even state "for many apps, like Instagram [...]" as a good example when
revenue is not needed. I'm flabbergasted.

~~~
timrosenblatt
If Instagram had been charging for their app, it would have been very hard for
them to get to the scale where they would be acquired by Facebook, especially
for anything near the $1b. I'd say everyone who had a piece in that deal is
flabbergasted too, but for different reasons.

Is this a strategy people should always aim for? No. But there are legitimate
reasons why revenue should not be the top priority, and this post does a good
job at narrowing it down.

~~~
zmanji
_[...] it would have been very hard for them to get to the scale [...]_

Without revenue you can say it would have been very hard for them to, you
know, exist as a company for some period of time.

~~~
timrosenblatt
You can say that, yes. But as a company with almost $8m in funding (prior to
the $50m/acquisition thing; <http://www.crunchbase.com/company/instagram>) and
low costs, they can defer revenue for a while.

~~~
ktizo
So if you can blag 8 million without any promise of revenue, then don't bother
with revenue. Sounds fine, but I assume that this doesn't apply to
bootstrapped companies in areas without large quantities of gambling
billionaires.

~~~
rrwhite
This post is not at all meant to be about what to do with your bootstrapped
business. It's only targeting high-growth, mostly b2c, companies in winner
takes all markets with strong network effects (ex: Pinterest, Instagram).
That's what I mean when I say "startup" though that term is completely
overloaded and adopted by everyone nowadays :)

~~~
ktizo
By your definition of the term 'startup', the early Apple wouldn't have
qualified.

~~~
true_religion
By his definition, Google was never a startup because they're not in an area
with strong network effects. Nor is their money-source B2C---they're sell
advertising space to businesses.

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timrosenblatt
The post is solid, but one of the things I like most in here are the signs of
looking at _where_ revenue came from (the comment about only 1% of revenue
coming from the entry-level plan).

I'd love to hear more from Richard about how they tested the impacts of moving
from the $5 to the free plan.

And yes, it's definitely a solid strategy to delay revenue for users. I'm sure
someone will argue this is Web 1.0-bubbly thinking. But, provided you're doing
it in the way that Richard suggests, it's not totally insane. Twitter might
not have found a great business yet, but at least they've gotten past one of
the big hurdles -- getting people to come to the party.

~~~
rrwhite
We tested it using Optimizely, what we use for A/B tests, but rather doing a
true A/B test we made into a sequential test (by manually setting all traffic
to go to one variation versus another). It took a couple days to test and it's
tough because since it's sequential traffic spikes will screw everything up
and you'll have to start all over. So basically we compared two weeks with
"average" traffic: running $5 plans one week and free plans the next week.
Obviously if anyone noticed we allowed them to switch their plan to free.

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georgemcbay
Pesky revenue, always trying to get in the way of creating a business!

Might as well take it a step further and consider waiting on building a
product. Why define your business with a real product when you can, like
Zombo.com, do anything?

~~~
rrwhite
The question, as I wrote in the post, ultimately isn't about whether you need
revenue or not. Of course you do eventually. It's about when you go for
revenue.

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jusben1369
I think the disconnect, and then perhaps vitriol, comes from the fact that
these are small, stand alone companies. Large companies take this strategy all
the time with a new group or division "Don't worry about revenue yet. Build a
great product, get to market, get solid adoption." Nobody argues when MSFT
takes that approach with say the Xbox. It's thought of as wise investments. In
this scenario the VC's are acting like the wealthy corporate mothership. It
just feels counter intuitive though.

If you don't want to take money or you're not in a market that is strongly
viral then obviously you have to be concerned about revenue much earlier. If
you are though then focusing on revenue in the short run may be detrimental.

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a_m_kelly
"A Stable (but perhaps unexciting) Business - This is where most people end
up."

Really? "Most people" with a new business end up with stable but unexciting
businesses?

I suspect most people end in failure, not Stable Business. In a post full of
deeply questionable logic, this little gem takes the cake for me. I suspect
some anecdotal evidence from otehr commenters will back this up or that there
is a bevy of statistics to prove that this is true, even in the rarefied
atmosphere of web companies.

~~~
rrwhite
I meant that most people end up here rather that in the first scenario of
hyper-growth. "Most people (who don't fail) end up here" would have been more
clear. Point taken.

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steventruong
Every business and business model is different. This should be considered with
a grain of salt. It is not a one size fit all

~~~
rrwhite
Nothing ever is which is why I wrote the answer to "when revenue" is: it
depends. I wrote this post because I talked to enough people who thought
companies not charging was _completely_ irrational. I believe most people,
including politicians, are rational actors you've just got to understand their
motivations and goals.

~~~
ktizo
Only economics folk think that people are generally rational actors. Try
talking to some neurologists or psychologists and see what they think of that
point of view, once they have finally stopped laughing.

