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During these days the latest articles by “top” US bloggers are all about how to survive from the huge financial crisis which is hitting the US market with all the evident consequences and impacts for the worldwide economy. When I read Robert Scoble’s blog, for instance, what I feel is FEAR.
I’m not really surprised since laids off are going on in many companies in Silicon Valley and Venture Capitals like Sequoia are rising a red flag advising their portfolio companies to prepare for a not that wonderful future. The truth is that companies don’t want to take risks and want to preserve their cash for bad times. I call it, again, fear.
In my opinion, the main goal for these companies must be the following: they should sit down with partners and investors and focus on their business model, if any. Yes, IF ANY. My perception is that too many startups in the past months have been focusing on getting money from VCs and Angels without any clear idea on how to make money. Ok, many companies did a great job without any business model in the past, but times are changing and everyone must face it.
I can’t remember how many companies I talked to which told me that “still don’t know” how to make money but, focusing on their product/service and supported from one or more VCs, could help them to find out a potential buyer, sooner or later. In times like this, when investors are not willing to risk too much and companies are laying employees off, if you don’t have a viable business model, the risk to hit the deadpool gets higher.
The times for a “quick and dirty” exit with a reasonable ROI for everyone involved are ended IMHO, also because big fishes are becoming more wise and are not going to buy new companies/services without having a clear idea on how to leverage them. Think of eBay and the Skype / Stumbleupon deals, for instance, companies which are both likely to be sold again. Those times are just memories, acquisitions are nowadays more focused for big names like eBay too.
Guys, this is the right time to get the following questions answered:
1) What problem is your product solving?
2) What is your target market?
3) Are your potential customers willing to spend money (real money, that is issuing payments from their bank to yours, just to be clear) to solve that problem in (1) ?
4) Does your business make sense in the mid and long term?
5) During a recession, have the questions above the same responses?
Focus on how to make money and to make your product a problem solver, otherwise the deadpool is behind the corner. And don’t tell me advertising is your business model. Please.
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October 15, 2008 at 5:04 pm
having a proper business plan
October 15, 2008 at 11:35 pm
[...] http://www.lucafiligheddu.com/2008/10/its-time-for-a-viable-business-model.html [...]