can they withstand a business model test? March 20, 2000 2:15 AM   Subscribe

While both deepleap and pyra are interesting applications can they withstand a business model test? I don't think so... From what I've heard, deepleap is scampering for investors but how do they plan on making money? Also the folks at pyra created the famous blogger but have yet to make any money? I ask the weblog community, especially Matt, does this make sense? While these web pioneers may get the web, and the people the met at sxsw get the web, I think they are missing a crucial factor... you must have a business model and not just a functional and useful application. What do you think?
posted by efader to General Weblog-Related at 2:15 AM (3 comments total)

I think both of these companies have business models as strong as any other website trying to make money these days. It doesn't look like Pyra is planning to make money off of Blogger, it is mostly a publicity and good will generator for them. Their about page states that Pyra itself is what they will be charging for. This seems like a much better business model than most websites. Even medium-sized companies shell out tens or hundreds of thousands of dollars in licensing fees for the software they use today; they should be perfectly willing to pay for the web services they use. Deepleap seems to be targeted at a mass audience and might be able to support itself through advertising.
posted by Yub at 10:38 AM on March 20, 2000

I happen to have an intimate knowledge of the deepleap business plan 'cause, well, I'm one of the founders. So I feel a certain need to chime in here.

It's important to note here that the real discussion is not about business models but revenue streams. B2b, b2c, b2g, you name it, any of those models can yield an incredible sucess or an incredible failure.

Speaking for deepleap, we structured ourselves in such a way that we can take advantage of both the b2b and b2c models. With this flexability comes a number of revenue streams (which I don't think I'll go into at the moment, just take my word for it). Advertising is one of them, but let me tell you, it's not so great unless you have tons of pageviews, which most sites don't.

This situation is made even more interesting by the fact that many companies are targeting markets which haven't been developed yet. This is certainly the case with deepleap and it provides us two possible futures: build the product, fail to develop the market, then die or flip. The other possability is to build the product, develop out the market, and then dominate it (until someone else comes along with a better implementation).

(sorry this is turning out to be so long)

The other question I would pose is "is building to flip really all that bad?" People are weary of the concept for good reason but think it may have gotten a bad reputation. It's very, very hard to survive on the internet with just a service. If you've noticed, most of the sucessful service companies are huge. It makes sense for these corps to acquire smaller companies that are building useful tools. It's a naturally evolving R&D market! At the SXSW startup panel Eric Hellweg asked "is your idea a feature or a product" and I would have to say that there are TONS of great ideas out there that aren't products. Should these ideas never be given a chance? Of course they should! Instead the would-be business people give it a shot, the market proves to them that their idea is just a feature, and if it's a good feature they are acquired.

Perhaps it would be advantageous to use both the term "build to sell" and "build to flip," the latter having a heavy (and often disgusting) concentration on exit strategy.
posted by bryanboyer at 9:41 PM on March 26, 2000

Ok, just one more thing. There's an idealized vision that you can start a company with the best of intent and never consider your exit strategy, but unless you're really lucky this is just not realistic.

VCs will ask for your ES, angels will ask for your ES, partners will ask for your ES, interviewers will ask for your ES.

Making the decision (and realizing when your decision is unrealistic) is part of the startup process just like writing a business plan.
posted by bryanboyer at 9:46 PM on March 26, 2000

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