So you think you know your business model?

@gdecugis
So you think you know your business
model?
Guillaume Decugis, Co-Founder & CEO Scoop.it
Mentor master class for The Reﬁners - October 2017
1

@gdecugis 2
What’s the difference between a company and a startup?

@gdecugis 3
“A startup is a temporary organization
used to search for a repeatable and
scalable business model.”
Steve Blank

@gdecugis 4
Hi I’m Guillaume
Discovered Silicon Valley as a grad student in ’94-95
Tech entrepreneurs for the past 15 years
Startup advisor
Came back to launch Scoop.it in 2011 (…and start a rock band)
acquired by
became
acquired by

@gdecugis 5
These are some of the things I’ve tried
B2C
B2B
B2B2C
Saas
Revenue-share
Ad-funded
Subscription

@gdecugis 6
Mistakes I made
Building a product nobody wants
Betting on hypothetical revenue (ad-funded…)
Thinking freemium is 95% of free and 5% of premium
Leaving money on the table
Word of mouth as a distribution model
Product launches as a growth strategy
Failing to land and expand

@gdecugis 7
If you shouldn’t have (yet) a business model, why should
you care now?

@gdecugis 8
you care now?
Your business models is different than your revenue model.
Even if you monetize later, you need to define how you will grow and scale
fast with limited resources.

@gdecugis 9
you care now?
You need to lay out the assumptions you’re betting on:
Some will prove wrong => pivot
Some will prove right => scale

@gdecugis 10
you care now?
You need to lay out the assumptions you’re betting on:
Some will prove wrong => pivot
Some will prove right => scale
Proving / unproving assumptions is the most critical thing you have to do as
an entrepreneur.

@gdecugis 12
To simplify, start by focusing on these key questions
Who are our customers?
Why do they buy?
How much are they willing to pay (perceived value, alternatives)?
How do we acquire them?
How do we keep them?
How do we grow them?

@gdecugis 13
Seems simple, right?
Who are our customers? Young adults
Why do they buy? Listen to music on the go
How much are they willing to pay (perceived value,
alternatives)?
$5-$15
How do we acquire them? Through mobile carriers
How do we keep them? Great QoS
How do we grow them? Sell more music
acquired by
2001

@gdecugis 15
This was a good business model but not for us and not
in 2001
Who are our customers? Young adults
Why do they buy? Listen to music on the go
alternatives)?
$5-$15
How do we acquire them? Through mobile carriers
How do we keep them? Great QoS
How do we grow them? Sell more music
2009

@gdecugis 16
The business model we ended up with
young adults
Why do they buy?
to listen to music on the go
$5-$15/mth
Who are our customers? Young adults Mobile carriers
Why do they buy?
Listen to music on the
go
To drive 3G
subscriptions
alternatives)?
$5-$15 $1-5 million/year
How do we acquire them? Through mobile carriers Enterprise sales
How do we keep them? Great QoS Tight integration
How do we grow them? Sell more music Sell more music
acquired by
20072001
Pivot
(that took us to $35MM/year in revenue and getting acquired for $121MM)

@gdecugis 17
Most startups pivot, even unicorns
Who are our customers? e-commerce sites
Why do they buy? To increase shopping basket value
alternatives)?
$5-15k/year
How do we acquire them? Enterprise sales
How do we keep them? ?
How do we grow them? Success fees
2008d by

@gdecugis 18
Most startups pivot, even unicorns
Who are our customers? e-commerce sites e-commerce sites
Why do they buy?
To increase shopping
basket value
To increase traﬃc
conversion
alternatives)?
$5-50k/year $100k-$10million/year
How do we acquire them? Enterprise sales Ad sales
How do we keep them? ?
Drive more sales for
them
How do we grow them? Success fees
20112008
Pivot
d by

@gdecugis 19
Keyword: alignment

@gdecugis 20
Misalignment vs alignment
What mobile carriers didn’t care about:
Make $.30 per download - even on millions of ringtones.
So they would NOT distribute us.
a
What they did care about:
Sell $50-$150/month 3G subscriptions and pay back their
investment in 3G.
Music was the perfect loss leader to them
So they were ready to push our services, market
them, give us the bulk of revenue and even pay
for set-up and maintenance.
And once they were live, no way to stop music
services without annoying their high ARPU
customers.
Different model than what we thought but:
Same technology / product
Same team / capabilities (engineering, content, services and carrier biz dev)
Same relationships (record labels, carriers)

@gdecugis 21
Alignment is what makes it possible to scale with limited
resources

@gdecugis 22
Getting the right business model
Why do they buy?

@gdecugis 23
Don’t build product nobody wants

@gdecugis 24
Would this be how some customers react to your
product being terminated?

@gdecugis 26
There are many wrong ways to evaluate the strength of
your value proposition
Cheap feedback:
“I really like your product” (but doesn’t use it every day or week)
“If you guys did this feature, I’d be totally paying for it” (but doesn’t have budget)
4-star ratings (nobody goes out of there way to recommend a product that’s below 5)
Quantitative Surveys:
BYOB = Bring Your Own Bias
A lot of people want to tell you what you want to hear
Use analytics wisely:
Beware of vanity metrics
Beware of the noise (1,000 fans + 10,000 unengaged = ???)
You don’t need analytics to validate you have 1,000 absolute fans (B2C) or 10 hooked
customers (B2B)

@gdecugis 27
The 3 best ways to validate product-market fit
1. Talk to customers

@gdecugis 28

@gdecugis 29
3. Talk to customers*
*seriously, do it

@gdecugis
What are your key challenges when creating
content?
Is content research a big part of your
content creation process?
What’s your current process for content
research? Do you use any tools for content
research?
Any frustrations or challenges with these
tools / process?
How do you ﬁnd new topic ideas that will
resonate with your audience?
How do you ensure your content stands out
against competition?
How do you benchmark your content
against competition?
Interested in the private beta?
30
An interview guide example for a new content
intelligence product
Ask open and broad questions
first, then narrow them down to
avoid missing their big picture.
Don’t assume anything.
Don’t bring any bias.
Make it an anti-pitch: don’t try to
convince them of anything.
But challenge what you don’t
understand / what doesn’t seem
right so you discover “hidden
whys”.

@gdecugis 31
Why do they buy?

@gdecugis 32
Don’t build on hypothetical revenue
Most common sources of
hypothetical revenue:
- Ads
- Freemium

@gdecugis
Not
willing to pay
33
What freemium is not
Willing
to pay

@gdecugis
Not willing to pay (yet)
34
What freemium is
Perceivedvalue
Time of use
Users
Willing to pay now)

@gdecugis 35
Reasons to delay revenue generation
Legitimate reasons:
Would slow down user adoption
No/little doubt on revenue model
Bigger assumptions to validate before
Doubtful / fake reasons:
We need to stay focus
We need critical mass
We need product feedback and it’s easier
to get it from free users

@gdecugis 36
Should you delay revenue generation? Or is it your
priority?
Legitimate reasons:
Would slow down user adoption
No/little doubt on revenue model
Bigger assumptions to validate before
Doubtful / fake reasons:
We need to stay focus
We need critical mass
We need product feedback and it’s easier
to get it from free users
If you plan on eventually charging customers, why not charge them now?
Is it because the value builds over time?
Or is it because the value is not there?

@gdecugis 37
Benefits of experimenting with revenue generation early
on
Get product validation
Understand value / price
Be more capital efficient (aka less diluted)
Team alignment
Ultimate success metric

@gdecugis 38
Why kill the bear
if you haven’t sold the skin yet?

@gdecugis 39
Don’t leave money on the table

@gdecugis 40
Which of these things are harder to get for a Saas
product?
$49 or $79 from a solopreneur / business owner?
$799 or $50,000 from IBM?
$4,000 or $12,000 from a midsize company?

@gdecugis 41
What makes more margin?
1,000 solopreneurs / business owners paying $49
or 1 IBM paying $50,000
or 4 midsize companies paying $12,000

@gdecugis 42
Revenue is the same but your acquisition costs will differ
1,000 solopreneurs / business owners paying $49
or 1 IBM paying $50,000
or 4 midsize companies paying $12,000
Exactly the same revenue

@gdecugis 43
Can you take all the money that’s on the table?
995 solopreneurs / business owners paying $49
and 1 IBM paying $50,000
and 4 midsize companies paying $12,000
3x the previous revenue

@gdecugis 44
Why do they buy?

@gdecugis 45
Don’t leave growth to chance

@gdecugis 46
There are many customer acquisition strategies
Paid acquisition
Sales outreach
Outbound marketing
Inbound / content marketing
Influencer marketing
Viral distribution
…

@gdecugis 47
There are many customer acquisition strategies
Paid acquisition
Sales outreach
Outbound marketing
Inbound / content marketing
Influencer marketing
Viral distribution
…
Which one can you build natively in your business model? Which one gives
you an unfair advantage?

@gdecugis 48
Example: How Dropbox got to 100 million users through
referrals that helped understand the product value
Dropbox initial acquisition strategy: AdWords.
CPA: $250+
Product price: $99/year
One of Dropbox’s key feature: ability to share a large file without attaching it
to an email.
Key friction point of freemium model: get more storage
Alignment: get more storage by sharing with friends

@gdecugis 49
Example: Scoop.it Growth hack to get 4 million users
and 75,000 leads
Free Scoop.it users:
Use Scoop.it to share content to their network to showcase their expertise
Generate distribution as they use our free product (yesterday’s 2,500 signups bring
tomorrow’s 2,500 signups)
Potentially the top of our funnel for our B2B Enterprise Saas
Content marketing to qualify and segment free users
Results:
4 million users (~2,500 signups / day)
75,000 leads and counting
Huge data set for our AI
without any paid acquisition costs

@gdecugis 50
Example: Scoop.it alignment
Content Marketing
What we do to
acquire customers
What we help
customers with

@gdecugis 52
Distribution partnerships are hard
Time-consuming
Need to really understand the value for the partner
AppStore vs OEM
Partner vs M&A
What’s in it for them? (Musiwave case)

@gdecugis 53
Why do they buy?

@gdecugis 54
Don’t rebuild the model with every new client

@gdecugis 55
A new customer needs to bring over time much more
than the initial transaction.
Tangible benefits:
Repeat business (e-commerce)
Lifetime value (Saas)
Referrals (Dropbox)
Intangible benefits:
Word of mouth
Case studies
User stories

@gdecugis 56
A new customer needs to bring over time much more
than the initial transaction.
Tangible benefits:
Repeat business (e-commerce)
Lifetime value (Saas)
Referrals (Dropbox)
Intangible benefits:
Word of mouth
Case studies
User stories
Can you “land and expand”, i.e. get more revenue in month M+1 vs month M or
year 2 vs 1?
What does it mean for the product / value proposition?

@gdecugis 58
The perfect business model
Who are our customers? Well identiﬁed customers
Why do they buy?
Have a clear and imperative reason to buy your
solution
How much are they willing to pay
(perceived value, alternatives)?
Which means they’re ready to spend signiﬁcantly
What you do to acquire customers helps the
rest of the model (improve product, acquire new
customers…)
Instant value that increases over time

@gdecugis 59
Key take-aways
Your business model is much more than how you make money: it’s how you
scale fast with limited resources.

@gdecugis 60
Key take-aways
If you’re not doing R&D of your business model now, you’re not a startup.
This should be your #1 priority.

@gdecugis 61
Key take-aways
Just like R&D, you don’t know your business model yet (and that’s ok!). To
discover it, you need to experiment - not just theorize.

@gdecugis 62
Key take-aways
Entrepreneurs make wrong assumptions all the time (and that’s ok!).
Successful startups identify them sooner enough to pivot and correct
course.

@gdecugis 63
Key take-aways
Entrepreneurs make wrong assumptions all the time (and that’s ok!).
Successful startups identify them sooner enough to pivot and correct
course.
Building a business model is tough. Building a business model without
alignment between the components is almost impossible.

@gdecugis 64
Your turn:
Why do they buy?
alternatives)?
2017Your Startup

So you think you know your business model?

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