Business Models 101

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STARTIAP 2016 BUILD A STARTUP IN FOUR WEEKS Elaine Chen Business models 101 January, 2016
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Transcript of Business Models 101

  • STARTIAP 2016

    BUILD A STARTUP IN FOUR WEEKS

    Elaine Chen

    Business models 101

    January, 2016

  • What are you leaving with today

    A list of possible business models relevant to

    your venture

    Everything you need to know to hallucinate a

    5-year forecast for your venture (hopefully)

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  • Before we begin:

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    FREE IS NOT A BUSINESS MODEL

    WhatsApp, FB, Twitter are anomalities. Why wont you do the hard work now and play to win?

    >40 out of 940

    companies funded

    by Americas most

    elite accelerator

    are woth more

    than $100M (4%)

  • Read this in your spare time

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  • But really, it s very simple

    3 classes of approaches

    Transaction based

    Subscription based

    Advertising based

    One factor that drives the LTV/COCA ratio

    One and done versus recurring revenue stream

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  • Some examples

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    Transactional Subscription Ad-based

  • Common wisdom

    Simple is beautiful

    You are building a hypothesis of what works, so you can test in the field. Complexity will befuddle you.

    Ad based is hard

    Ad-based needs scale, scale needs awareness, awareness needs time and money startups dont have

    Most investors will be skeptical

    One and done is hard

    Recurring revenue stream creates much needed sanity in the chaos of a startup

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  • Why is one and done hard?

    8Source: David Skoks 2015 SaaS survey infographic

    http://www.forentrepreneurs.com/2015-infographic/

  • Anything can be made recurring

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  • Ways to get to a recurring business model

    Gillette Razor blades, transactional

    Keurig K-cups, transactional

    Uber, transactional

    Amazon Subscribe-and-save, subscription

    Industrial automation field service plans, subscription

    Industrial automation field repair, transactional

    C-space subscription

    LinkedIn subscription (true freemium)

    Atlassian subscription (pseudo-freemium)

    Rackspace subscription (no freemium)

    AWS metered transactional

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  • Workshop activity: Business Models

    Enumerate all the business models you can think

    of that is relevant to your venture and classify

    them by the 3 approaches (transactional,

    subscription, ad-based). Think about ways to

    maximize life time value. See if you can come up

    with a recurring revenue model.

    Pick the one you think works best and explain why.

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  • Sharing!

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  • Case study: Atlassian

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    Market leading software dev and mgmt tools

    Profitable for 10 years, 48.5% growth YOY 15

    Revenue $320M in 2015

    IPO late 2015 Valued at $5.8B

    48,000 paying corporate customers

    >5m active users

    864 customers spent $50,000+

    Great customer retention (Cisco, Kroger, Verizon were customers since 2003)

  • Pseudo-freemium

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  • Pricing tiers

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  • Its not all self service, but close

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  • Simple template: B2C SaaS

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    Y1 Y2 Y3 Y4 Y5

    Average annual subscription fee per user ($$)

    # New users this year

    %Churn

    # Install base this year (= #new + #old last year churn)

    Revenue this year ($$)

  • Example forecast: Product +

    subscription (e.g. traditional MCAD)

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  • Example forecast: Consumer

    electronics connected device

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  • Example forecast: B2B SaaS

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  • Example forecast: Consumer marketplace

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  • End

    Questions?

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