Internet Business Models for Startups

2011 David Teten. More at ffventure.com and teten.com

Internet Business Models

Founder Institute Singapore Launch April 26, 2010

http://www.flickr.com/photos/zetotal/3841245048/

David Teten, Partner, ff Venture Capitalffventure.com blog: teten.com@dtetenNew York, [email protected]

Tells Network Next StepsIntro Models


• Introduction

• Business Models

• Tells of People and Companies You Want to Know

• Growing Your "Network 2.0"

• Next Steps



ff Venture Capital (ffventure.com)• Early-stage technology venture capital fund based in New York• Founded 1999, with over 100 investments in over 40 companies• Focus on early stage web-based services companies with disruptive models, including

SaaS, video gaming, digital media, social, mobile and VoIP• First investments typically $50-$250K at valuations of <$5m pre-money• 50% of fund reserved for follow-on investments• Prominent angel investments include:

Cornerstone OnDemand (IPO); Quigo Technologies (sold to AOL for reported $340m); Klout, Hashable, Voxy, Phone.com

• Two partners: John Frankel (21 years Goldman Sachs) and David Teten; one Venture Partner (Michael Yavonditte, CEO, Hashable)

http://ffventure.com/



David Teten (teten.com)• Partner, ff Venture Capital, early-stage technology venture capital fund• Founder and Chairman, Harvard Business School Angels of New York• Founder and Chairman, Navon Partners, research and analytics focused on private

companies• Managing Director, Evalueserve, through September 2008. 2,500-person finance-focused

research and analytics firm. • Founder and CEO, Circle of Experts (investment research firm), sold to Evalueserve• Founder and CEO, Teten Executive Recruiting, sold to Accolo, #42 on 2007 Inc. 500• Founder and CEO, GoldNames, domain name investment bank, based in Israel• Technology/Defense Investment Banking, Bear Stearns (#1 group at Bear investment

banking by revenues) • Lead author, The Virtual Handshake: Opening Doors and

Closing Deals Online (TheVirtualHandshake.com)• Harvard MBA 1998, Yale BA, both with honors.• Contact: [email protected]

http://www.teten.com/

http://www.ffventure.com/

http://www.hbscny.org/angels

http://www.navonpartners.com/



• Introduction

• Business Models



• Next Steps

http://siteboat.com/what-is-an-internet-business/



Symmetric vs. Asymmetric Business Models

Symmetric models are ones where the user of a product and the person paying for it are the same

Asymmetric models are ones where the user is different from the person paying the company for the product

Munjal Shah, “Revenues”, presentation to Founder Institute; http://www.flickr.com/photos/andre-batista/2697697617;http://www.flickr.com/photos/gustty/286033333/



Symmetric vs. Asymmetric Business Models

Amazon.com Sales force.com Yahoo Mail (old) iTunes Store All virtual goods Hyatt.comiphone games

Facebook Google Gmail Yahoo (mostly) eBay Twitter Like.com

Munjal Shah, “Revenues”, presentation to Founder Institute; http://www.flickr.com/photos/andre-batista/2697697617;http://www.flickr.com/photos/gustty/286033333/



Symmetric Business Models• Are easiest because your team only has to focus on one type of customer• No push and pull within internal teams on “selling out the UI to advertisers”• Revenues end up a very accurate proxy for user interest / satisfaction, so

you only have to focus on one variable, but there is huge friction to distribution

• Unfortunately for B2C companies, usually asymmetric models dominate• ~80% of the market cap of internet companies is asymmetric

Munjal Shah, “Revenues”, presentation to Founder Institutehttp://upload.wikimedia.org/wikipedia/commons/thumb/f/f1/Esplanade_by_slivester_for_wiki.jpg/800px-Esplanade_by_slivester_for_wiki.jpg



Why Are So Many Success on the Web Asymmetric?

Because the cost of distribution is almost zero: so very easy to make it free for customers

E

Quantity0

∞

∞

Price

PSupply

Demand

Quantity0 ∞

Price

P

http://laserlike.com/2009/04/18/microeconomics, cited in Munjal Shah, “Revenues”, presentation to Founder Institute

∞Supply

Demand



Don’t Be Low Traffic and Low Commercial Intent

Lead Gen Nirvana

Death Valley Top 20 sites

BillshrinkLike.com

Most Web 2.0 companies

FacebookTwitter?Online Games

Only Google Search Twitter?

Low Traffic High Traffic

Low

Inten

tHi

gh In

tent

Cons

umer

Inte

nt to

Do

Com

mer

cial T

rans

actio

n

Scale in Terms of Number of Users

Munjal Shah, “Revenues”, presentation to Founder Institute



Corollary: Relevancy Doesn’t Equal Intent

Any ads with Budweiser Girls on a Mommy blog

Geriatric shoes on a MMORPG gaming site

Dogfood ads next to photos of dogs

Botox ads on dating issues

Low Relevancy High Relevancy

Low

Inten

tHi

gh In

tent

Cons

umer

Inte

nt to

Do

Com

mer

cial T

rans

actio

n

Relevancy of the Ads PlacedMunjal Shah, “Revenues”, presentation to Founder Institute; http://www.flickr.com/photos/the_airrunner/174915900/; http://www.flickr.com/photos/cobblucas/3225553226/;

http://www.flickr.com/photos/seiu/374542734/; http://www.flickr.com/photos/playerx/3574370486/; http://www.flickr.com/photos/defrostca/3491557470/



Advertisers need to spend most effectively.

Google offers outstanding

search product.

Google grabs share.

Ad revenue funds improvements in

search.

Jay Jamison, “Revenues”, presentation to Founder Institute

Virtuous Circles



Price per user or copy

Examples: Microsoft Office, Enterprise apps, Iphone Premium Apps

http://helpahoy.com/images/ms-office-logo.jpg; http://www.inflecto.co.uk/Inflecto-Blog/image.axd?picture=2009%2F12%2Fiphone_apps_500_apple.jpg



Ecommerce Products

Examples: Amazon, Lands’ End, iTunes, Dell

http://www.mediabistro.com/galleycat/original/amazon_crave.jpg; http://www.seeklogo.com/images/L/Lands__End-logo-34CCF7E9A7-seeklogo.com.gif;http://mysterymanpodcast.files.wordpress.com/2009/07/itunes-logo1.png?w=150&h=163; http://www.mlf.lu/mlf/material/divers/dell-logo-jan09.jpg



Ecommerce Services: Move the Offline Online

Examples: Circle of Experts, Gerson Lehrman Group, LegalZoom

http://circleofexperts.com/images/evs_logo.gif; http://linksatelliteconnections.com/irwincom/images/clients/glg.gif; http://www.legalzoom.com/img/legalzoom-logo.gif



Advertising + Affiliate Model / Figure it out later

Examples: Google, Yahoo, Twitter, Facebook, NYTimesLots of others

http://www.google.com; http://www.yahoo.com; http://www.twitter.com; http://www.stetson.edu/administration/communityservice/media/images/facebook-logo.jpg; http://graphics8.nytimes.com/images/misc/nytlogo379x64.gif



Freemium & Subscription

Examples: World of Warcraft, Club Penguin, Dropbox, Animoto, Salesforce.com

http://webpages.scu.edu/ftp/jhhoward/images/world-of-warcraft-logo.jpg; http://snowdobbyjey009.files.wordpress.com/2008/04/new-cp-logo.png?w=520&h=274http:www.dropbox.com; http://istockalypse.com/Istanbul/img/sponsor_animoto_lg.gif; http://www.brandsoftheworld.com/brands/0021/4399/brand.gif



Brokerage

Examples: Ebay, Orbitz, CarsDirect

http://pics.ebaystatic.com/aw/pics/logos/logoEbay_x45.gif; http://www.orbitz.com/site/img/chrome/nav/logo.png; http://cdc-img.ibsrv.net/common/navigation/images/nav_cdc_logo.gif



Infomediary

Examples: Advertising networks (LinkShare, Commission Junction), Audience measurement (Nielsen)

http://www.insightempire.com/linkshare_logo.png ; http://www.cj.com/images/common/commission_junction.gif; http://www.nielsen.com/etc/content/nielsen_dotcom/global/site_navigation/site_nav_set2/header.portlets.11331.LinkList.6133.ImageSrc.gif



Virtual goods

Examples: Facebook apps, Zynga, Habbo

http://blog.taragana.com/wp-content/uploads/2009/07/facebook.jpg ; http://www.zynga.com/img/logo.png; http://www.habbid.com.br/guias/heth08_Habbo-logo.jpg



• Introduction

• Business Models



• Next Steps



Growing Companies

http://flickr.com/photos/laserstars/908946494/sizes/o/



Companies that Hired People/Firms Like You

http://www.flickr.com/photos/foundphotoslj/1134148114/



Databases

http://www.dnb.com/

http://www.bvdep.com/

http://www.10kwizard.com/main.php?g=

http://www.docuticker.com/

https://www.themarkets.com/

http://www.reuters.com/

http://www.zoominfo.com/Search/

http://www.factiva.com/index.asp

http://www.thedeal.com/

http://lbo.djnewsletters.com/default.asp

http://www.buyoutsnews.com/AdClick.asp?ad=Y12948-17328625&pp=Y12948-173282F1&url=http://www.buyoutsnews.com/subscribeMenu.asp?prodTypeCode=2

http://www.privateequityanalyst.com/

http://www.specialissues.com/

http://www.fitchratings.com/corporate/index.cfm

http://www.highbeam.com/index.asp?homepage=y&ctrlInfo=Round23:Prod:HP:Hdr.Home

http://www.pewnews.com/index.asp

http://www.researchandmarkets.com/index.asp

Tells Network Next StepsCharacter – Competence – Relevance – Strength – Information – Number – Diversity

Intro Models


• Introduction

• Business Models



• Next Steps

Tells Network Next StepsCharacter – Competence – Relevance – Strength – Information – Number – Diversity

Intro Models


= D * ∑ (Chn *Con *Rn * Sn *In)

Ch = CharacterCo = Your Firm’s Competence R = Relevance of the contactS = Strength of your relationshipI = InformationN = Number of peopleD = Diversity

Network Valuation Formula

N

n=1David Teten and Scott Allen, The Virtual Handshake: Opening Doors and Closing Deals Online (www.TheVirtualHandshake.com)



• Introduction

• Business Models



• Next Steps



Any questions ?

Slides at www.teten.com

More resources at ffventure.com and teten.com

Contact: [email protected]


http://www.ffventure.com/


mailto:[email protected]



• Manjul Shah, CEO, Like.com• Jay Jamison, Co-Founder & President, Moonshoot• Jed Chen, SmithStreetSolutions,

for help in research and graphics• Darren Luo• Michael Rappa, http://digitalenterprise.org/models/models.html

Acknowledgments to…

http://digitalenterprise.org/models/models.html

Internet Business Models for Startups

Business

Transcript of Internet Business Models for Startups