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12/06/11 | Uncategorized

Startup Weekend: The Business Model Resource Guide

By Renee DiResta (Associate, O’Reilly AlphaTech Ventures)
I’ve said before — Startup Weekends are a lot of fun. Participants come together as a team, find a compelling idea, define and attempt to implement a minimum viable product, and come up with a plan to take the idea to market, all within 54 hours. So far, I’ve attended three as a developer. At Women 2.0’s recent Startup Weekend, I had the opportunity to participate from the other side of the table.

This time around, I was an advisor. Every team I spoke to asked me the same question: “What should our business model be?”

It’s easy to come up with an idea. It’s difficult to create a viable business around that idea, especially if you’re new to entrepreneurship.

Here are a few things to keep in mind when coming up with that very first iteration of a business model:

  • Who is your customer? Start with this. You can’t have a business without customers. In 54 hours, you won’t have time to diagram out a lot of personas or do extensive market research, but you should have some idea of who your customers will be. If your idea scratches your own itch, you can start by thinking about you. User demographics will influence every other aspect of your business plan, from what you can reasonably charge to how you will approach marketing. Knowing your customer is also important for thinking about market size; if you’re targeting a niche group, your potential pool may be quite small.Sometimes there is a difference between the customer and the user. A number of the companies at Women 2.0 Startup Weekend were considering business-to-business-to-consumer (B2B2C) plays, where the startup sells to a company who then markets the product to its customers. The company is often the paying customer, so the product and price point have to meet its needs. The end ‘C’, however, is the person who will ultimately use the product, so you should be thinking about the needs of both parties.
  • Why would that customer want to use your product? This is your value proposition. What is it you offer that your theoretical user wants to have? You don’t need a completely unique idea — Google wasn’t the first search engine — but saying “We’re going to do X better” isn’t specific enough. There’s friction in change. Think about why a customer would want to use your product instead of the one they’re already familiar with. You won’t have a whole lot of time to do extensive research during those 54 hours, but it helps to look at existing competition and see which companies in the space have succeeded and which have failed.
  • How will you acquire customers? This is often the hardest part of starting a business. ”It’ll go viral” or “We’ll make the product post to Facebook so people hear about it” are rarely viable strategies. You’ll more likely be relying on direct outreach, marketing, distribution partnerships, etc. There is a lot of great material out there for how to think about customer acquisition channels and costs. For a good place to start, read these.
  • How will you generate revenue? This is another tough question — especially when you have less than 54 hours to think something up — but you have to start somewhere. Saying that you’re going to sell a single app for $2.99 isn’t particularly compelling… it can be a great lifestyle business, but you might want to try thinking bigger. This list is by no means comprehensive, but here are a few common revenue models to consider:
  •  
    • Advertising
    • Affiliate
    • Subscription
    • Freemium
    • SaaS (software as a service)
    • In-app purchases
    • eCommerce/Marketplace

    Think about the one that fits your idea the best, and build from there. To delve deeper into each of these, check out Quora.

Many prominent business development folks post answers there about what has (and hasn’t) worked for them. Steve Blank, Eric Ries, and Alexander Osterwalder have also written extensively about entrepreneurship, and have a lot of great material on how to develop a business model.

Until the next Startup Weekend

This post was originally posted at No Upside.

About the guest blogger: Renee DiResta is currently an Associate at O’Reilly AlphaTech Ventures, where she researches emerging technology trends and supports portfolio companies. Prior to OATV, she spent six and a half years as a trader at Jane Street Capital, a quantitative proprietary trading firm in New York. Renee holds a B.S. in Computer Science and Political Science from the State University of New York at Stony Brook. Follow her on Twitter at @noupside and her VC firm at @oatv.

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