I’m trying to catch up on some reading and found an interesting post by Ross Mayfield:
The problem is there are too many companies being created that have no aspirations to be companies. Most survey the feature portfolio of tier 1 and tier 2 acquirers and are precision guided towards flipping within 18 months. Many make no attempt at generating revenue and most that do generate revenue from the advertising of other startups, let alone demonstrating a business model.
A dirty little secret for those actually building these things into businesses is that generating community value takes time.
I’ve been thinking about this a while considering that it is part of my job to see through startups without a working business model (or actually, it is my colleague Fredriks job – soon to be read in our new blog Good Old Business). Obviously these sites have interesting aspects to study aside from the potential revenue streams, but this matter can not be put aside. At least not for me as that is the first question my clients will ask me.
Working in a European market where Bay Area-sized investments are considerably more rare, the business model is crucial to even see the light of day. I would have thought that this was the obvious line for any VC, but after reading this I can see a little clearer what’s going on. Meta-money and marketing through Techcrunch – no wonder this could happen.
Today’s successful ventures are twice as old as the 18 month window. They were born when it was a shitty time to create a company, were largely either hacks cast out openly to serve an immediate itch and community (e.g. Blogger, Six Apart, Technorati, Newsgator, del.icio.us) or almost accidental creations that caused a business model iteration (Flickr).
Read the post – it’s well worth it, and a bit of an eye-opener for me actually.