14 comments

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  allen stern

  1 year ago

  nice post - after my post this morning and then jason's - i noted that there's a difference btw those who have large bank accounts and those who don't - seems you agree which is great :)
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  mathewi

  1 year ago

  Thanks for getting the ball rolling, Allen :-)
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  Jason

  1 year ago

  That title is not fair and you know it very well Mathew... however, I applaud your link-baiting skills. :-p
  
  To be totally clear, I was on the other side of the fence a couple of years ago. Before Weblogs, Inc. I had to build a business based on making money TODAY, not three to five years from now.
  
  Today? Yes, I'm part of the group that can get a project funded. That's just reality and I'm certainly grateful for it. I also would never apologize for it... if Ev and Marc Andreessen can raise tons of money to build out Twitter and NING over a five year plan that's great... they earned that right.
  
  If someone new to the game (like me back in the 90s) has to prove themselves so be it!
  
  You don't have to be a "player" to make it happen, but if you want to take the "build for three years before thinking about revenue" model you better have a track record or a lot of money in your pocket!
  
  Happy new year,
  
  Jason
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  mathewi

  1 year ago

  Thanks, Jason -- but I'm not prepared to admit that my title is total
  linkbait.
  
  I think your suggestion that it's okay not to worry about a business
  model so long as you are a player like Ev is a dangerous one -- not
  for Ev, or for you perhaps, but for others, who might get the wrong
  message and focus solely on trying to build a massive user base,
  hoping to monetize it later.
  
  In any case, I wish you (and Ev) nothing but the best.
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  Mick Gee

  1 year ago

  Great post. As much as I'm a fan of Jason, that kind of sentiment is so frothy, it's downright scary (at least for anyone who still remembers the original dot bomb era).
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  mathewi

  1 year ago

  Thanks, Mick. I agree.
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  Jeremy Toeman

  1 year ago

  Great post Mathew. I recommend entrepreneurs read The Innovator's Dilemma and Solution books by Clayton Christiensen. In the Solution he keeps reiterating how important it is to have a drive toward profitability...
  
  In Silicon Valley it's pretty easy for people to be swayed by seeing YouTube, Delicious, and others who got acquired with no revenue models fully baked. They forget the THOUSANDS of startups that failed in the exact same spot.
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  mathewi

  1 year ago

  Thanks, Jeremy -- I would agree with your recommendation. Both of
  those books are excellent.
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  Stuart MacDonald

  1 year ago

  Saying that you can be successful at something without clear means to profitability has to be the stupidest f***ing thing I've heard in a long time. Idiotic. But then, that's pretty much what I've come to expect from Calacanis. And, if you define "success" as getting as I suspect he does - by getting some other idiot to buy you - then I guess he might be right.
  
  Doesn't make any of it a good business idea though. Sustainability has to be in there in my view.
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  mathewi

  1 year ago

  Couldn't agree more, Stuie.
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  davemc500hats

  1 year ago

  absent Jason't characterization of "you gotta be a player", i believe his analysis is mostly correct... Fred Wilson states it perhaps a bit more gracefully (altho jason probably gets more pageviews ;)
  
  twitter & other services can be successful by going for distribution first, then monetizing later, if they have sufficient capitalization. some assumptions about value per customer / page view / monetization should be inherent in such a strategy, but jason may not be far off that with some critical mass of users in double-digit millions you can be successful -- of course, does depend on how much capital takes to get there too.
  
  other companies can also be successful by going narrow and monetizing earlier, and this may be more necessary / prudent if less capital available to the business. but the Internet *does* provide a natural platform for acquiring many users quickly, and startup businesses that demonstrate this will be rightly / reasonably valued based on users/usage metrics, assuming customer acquisition costs are low & future potential value is high.
  
  more specifically: to characterize either a growth or monetization strategy as right or wrong w/o looking at the business details is stereotyping -- it depends on the [current / potential] value per customer, customer acquisition strategy & cost, growth rate, capital, etc etc. as with offline businesses, the Internet can encompass a number of business models.
  
  to wit, you can be successful:
  
  - selling a few thousand Ferrarris, or a hundred million sticks of chewing gum
  - running a small profitable business from get-go, or Amazon that doesn't turn a profit for 10 years
  - on a subscription model, an ad-driven model, a lead-gen model, or a purchase model
  
  while going for broad distribution first w/o paying attention to monetization may sound like a bad dot-com 1.0 model, plenty of companies mentioned previously have grown a large business without substantially monetizing the userbase until after making an exit (Skype, YouTube are big examples; Flickr & MyBlogLog are smaller examples).
  
  this isn't to say you shouldn't be figuring out a monetization strategy, but it may not be first (or second) priority if you are growing well & have reasonable confidence in positive future value / user monetization.
  
  sorry have i beat this horse dead enough yet?
  
  - dave mcclure
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  mathewi

  1 year ago

  Thanks, Dave -- you definitely gave the horse a good beating :-) And
  for what it's worth, I think Jason and Fred -- and you -- probably
  have a point. I just thought the way Jason said what he said at the
  end sent totally the wrong message.
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  David Gratton

  1 year ago

  Actually I disagree with you, Dave (and Fred). The assumption is based on rising asset prices based on future monetization POTENTIAL of a large and expensive user base.
  
  This is fine while VCs are flush with cash, but it will only take one company like Facebook failing to meet some future expectation to make the house of cards come crashing down. So while asset prices climb based on user base, your assumption is true. But eventually someone has to "Show Me The Money."
  
  This is no different than silly valuations in the 90s based on BURN rates. Or dare I say the recent housing boom and crash in the USA.
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  Shaun Markey

  1 year ago

  Having just read John Cassidy's "dot.con - the greatest story ever sold", it makes me shudder to read that some entrepreneurs today believe that building traffic and users is a replacement for revenue. That smacks of the same kind of thinking that gave rise to so many failed dot.com companies in that frenzied era.
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