The document discusses strategies for building a startup in four weeks, focusing on identifying relevant business models such as transaction-based, subscription-based, and advertising-based approaches. It highlights the importance of recurring revenue streams for sustainability and provides examples of successful companies that have utilized these models. Participants are encouraged to enumerate potential business models for their ventures and forecast their growth over five years.

1. STARTIAP 2016
BUILD A STARTUP IN FOUR WEEKS
Elaine Chen
Business models 101
January, 2016

2. What are you leaving with today
• A list of possible business models relevant to
your venture
• Everything you need to know to hallucinate a
5-year forecast for your venture (hopefully)
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3. Before we begin:
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“FREE” IS NOT A BUSINESS MODEL
WhatsApp, FB, Twitter are anomalities. Why won’t you do the hard work now and play to win?
>40 out of 940
companies funded
by America’s most
elite accelerator
are woth more
than $100M (4%)

4. Read this in your spare time
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5. But really, it’s very simple
• 3 classes of approaches
– Transaction based
– Subscription based
– Advertising based
• One factor that drives the LTV/COCA ratio
– One and done versus recurring revenue stream
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6. Some examples
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Transactional Subscription Ad-based

7. Common wisdom
• Simple is beautiful
– You are building a hypothesis of what works, so you
can test in the field. Complexity will befuddle you.
• Ad based is hard
– Ad-based needs scale, scale needs awareness,
awareness needs time and money startups don’t have
– Most investors will be skeptical
• One and done is hard
– Recurring revenue stream creates much needed
sanity in the chaos of a startup
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8. Why is one and done hard?
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Source: David Skok’s 2015 SaaS survey infographic

9. Anything can be made recurring
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10. Ways to get to a recurring business model
• Gillette Razor blades, transactional
• Keurig K-cups, transactional
• Uber, transactional
• Amazon Subscribe-and-save, subscription
• Industrial automation field service plans, subscription
• Industrial automation field repair, transactional
• C-space – subscription
• LinkedIn – subscription (true freemium)
• Atlassian –subscription (pseudo-freemium)
• Rackspace – subscription (no freemium)
• AWS – metered transactional
• …
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11. Workshop activity: Business Models
Enumerate all the business models you can think
of that is relevant to your venture and classify
them by the 3 approaches (transactional,
subscription, ad-based). Think about ways to
maximize life time value. See if you can come up
with a recurring revenue model.
Pick the one you think works best and explain why.
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12. Sharing!
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13. Case study: Atlassian
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• Market leading software dev and mgmt tools
• Profitable for 10 years, 48.5% growth YOY ‘15
• Revenue $320M in 2015
• IPO late 2015 – Valued at $5.8B
• 48,000 paying corporate customers
• >5m active users
• 864 customers spent $50,000+
• Great customer retention (Cisco, Kroger, Verizon
were customers since 2003)

14. “Pseudo-freemium”
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15. Pricing tiers
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16. It’s not all self service, but close
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17. Simple template: B2C SaaS
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Y1 Y2 Y3 Y4 Y5
Average
annual
subscription
fee per user
($$)
# New users
this year
%Churn
# Install base
this year (=
#new + #old
last year –
churn)
Revenue this
year ($$)

18. Example forecast: Product +
subscription (e.g. traditional MCAD)
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19. Example forecast: Consumer
electronics – connected device
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20. Example forecast: B2B SaaS
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21. Example forecast: Consumer marketplace
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22. End
Questions?
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