Google’s motto was URL: Ubiquity First, Revenue Later. It spawned a generation of startups that opted for first gaining a critical mass, and then figuring out how to make money. Think Twitter, Facebook, Tumblr, Instagram…
Things are different now. For the lot of us dreaming up ideas and paging through tens of 100s of piles of research and conducting surveys online and F2F, we are faced with quite the opposite: how to come up with two revenue streams: one from Year 1 to fund the business once the seed and bootstrapping won’t suffice, and then two to fuel the second stage of growth, the real money maker. For ex: Birchbox wasn’t the first in the subscription business. TestTube Beauty was. But Birchbox sold for $10. TestTube sold for about 3X that. Birchbox also added a retail component so the subscription sales = Revenue Source 1 to drive the engine until those subscribers convert to become buyers at the e-tail site, Revenue Source 2.
This winter I went to a party in Kendall Square where I spoke to many executives, among them someone from HP. He told me that nowadays startups that can prove the ability to sell get a year of funding. If you don’t meet the set deliverable in a year, the VC firm cuts you off. Maybe it’s because so many got burnt in the last bubble and so many current trends are social driven, but fail to show the conversion to revenue generating.
Nonetheless it’s a luxury to have the time to spend on an idea. Sadly when the idea seems feasible but just costs too much to gain the critical mass, it feels like that breakup you’ve been avoiding, that signficant other you’ve held on to because there was history or passion or both.
But that led me to a better a understanding of disruption vs. innovation, and where platforms and communication innovations come into all of this.
DISRUPTION, much as I’m tired of the word and concept, tends to come in the form of a platform on which other new technologies or products sit. It changes how you create, consume and buy. Think Facebook, Twitter, Google, Apple O.S., email, streaming TV.
INNOVATION introduces a new, often sexy way of buying, reading, watching, interacting. Think cell phone Apps, Square, LevelUp.
Now take something like Aereo. Where does it fit? Now think money transfer. Square isn’t changing how money flows between parties - the message is still the same, it’s just the medium, like most other cases, that has been altered.
The space I’m really interested in is how credit card and banking exchanges will change over time - how someone will innovate in such a way that the 2-3% credit card fee could change? How could we give to the homeless even without cash?
Sometimes it’s the smallest everyday occurrences that drive the biggest ideas.
