Questions

I'm working on a startup. The idea is well received. We need to raise money to get a functioning product. Advice on how to go about it is split in 2 camps. Camp 1 says: "Make a revenue model and show an investor how he/she can value the company and decide what their investment is worth in terms of percentage of the venture" Camp 2 says: "Don't bother about revenue, you'll make a barrier to users, users before revenue... get it out for free and blow up the industry" My question is: We still need money for development, how do I decide that $X is worth %Y for the camp 2 approach.

The sole purpose of a business is to make money. If that is not the case for you, then you are not building for-profit business. Days of acquiring users and raising funds solely based on the millions of eyeballs visiting the web site has passed. With SW&HW being commodity, marketing is emerging as the most expensive cost center for B2C high growth startups. Consumers are willing to pay for the service that they value, so I would focus on pricing strategy, looking for price-value equilibrium that your customer is willing to pay. Hopefully, the price point and the volume of paying customers would be financially attractive not only for you, but for an investor too. There's no way knowing where that equilibrium is until you try, refine, iterate...


Answered 3 years ago

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