The Startup FAQ - Post 2

This is in continuation to my previous post "Startup FAQ - Post 1" on this blog which I had posted on Dec 26, 2006 ... approximately 8 months back. Now, I'm not sure if you folks are even keeping track of this anymore, nonetheless, I'll try to be more regular now hoping to provide some value to the entrepreneurs out there.

• I think we should focus on investment first, right? Once we get investment, the revenue piece will get sorted out automatically.
  Having done this ourselves, I can give you some food for thought. Lets think about it for a moment ... a business ultimately has to earn revenue, Im sure you wouldn't argue against that. Think of investment as a buffer that will help you get to the point when you have revenue and you are self sustaining. So first you need to think about revenue, then comes investment or any other route that will help you get there.


• I have figured out the revenue model, now lets move on to investors?
  Waaaait a minute ... we know our revenue model so I presume we know our customers. The next step is not to go to investors, but to go to customers and ask if the service that you'll provide is of any value to them or not. If it isn't, then you need to go back and do more homework. If it is, then you need to ask them if they'll pay for it, and if yes ... then how much?


• I have customers and they are willing to pay, so Im all set?
  Well, do keep in mind that there is a little difference between willing to pay and actually paying. So you need to make sure they really mean what they are saying. One way would be to ask them if they'd be willing to pay a small token amount that would help build such a service ... and if they're willing to do that, you're all set


• Hmmm ... i see, is there anything else that I also need to do?
  One more thing ... a successful business has to solve 2 problems -
  1. Solve a need that exists,
  2. Enough customers should have that need.
  So problem 1 was solved by finding customers and making sure they are ready to pay. Now that we have done that exercise, the next step is to make sure that there are enough such customers in the world. This is important because you need to make sure that the need you are solving affects enough customers to give you that scale that will allow you to grow your business going forward ... makes sense?

... shall have more in my next post, until then Happy Entrepreneuring.