Ask News.YC: Should You Implement Your Business Model at Launch? Joe Kraus vs Paul Graham
Any time two people who know a ton about startups seem to differ there's something interesting to think about.
Joe Kraus> Put your business model into beta when you put your product into beta.
Paul Graham> The reason we tell founders not to worry about the business model initially is that making something people want is so much harder.
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.
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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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.
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.
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.
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.