Startup Priorities: Sequencing Business Models for Success

Startup Priorities: Sequencing Business Models for Success

Starting a new company can be an overwhelming task for any founder. With limited resources and a small team, it's crucial to prioritize effectively to ensure the success of the startup. In this article, we will explore the importance of choosing the right metrics to track, building features that impact a large user base, and understanding the different types of marketplace business models.

When it comes to startup priorities, choosing the right metric to track is crucial. By focusing exclusively on making that metric grow, you can steer your company towards success. It's essential to pick a metric that you are confident you can increase. However, it's equally important that the chosen metric is a good objective measure of your company's performance, especially for potential investors.

To determine which metric to focus on, consider the equation: (b * d) / c. Here, b represents the number of users impacted by a new feature, d describes the importance of the feature to the average user, and c indicates the level of difficulty in building the feature. By prioritizing features that affect a large number of users profoundly and can be built quickly and cheaply, you can maximize growth and product/market fit in the early stages of your company.

But before aiming for scale, it's crucial to find 100 users who genuinely love your product. These early adopters will provide valuable feedback and insights to help you refine your offering. Once you have achieved product/market fit, you can refocus on growing your user base to gather the necessary data from your customers for future decision-making.

Sequencing business models is another important aspect of startup priorities. As companies grow, they often need to adapt their business models to accommodate changing market dynamics. Marketplaces, in particular, have various types of business models that can be sequenced over time.

Starting with a SaaS-like model, where the focus is on solving customer problems, the primary value proposition is often payments. Solving payment-related issues is crucial for building trust and ensuring smooth transactions within the marketplace. As the business model evolves, the sophistication of value propositions offered to suppliers increases.

Moving towards the right of the business model spectrum, a light marketplace may offer leads or connections, leaving it up to the supplier to close the transaction. However, as the marketplace aims to enhance liquidity, the focus shifts to matching and ensuring that supply attracts demand. This requires more effort from the marketplace in managing the transaction process.

For demand, the value proposition landscape is relatively simple. SaaS companies have no direct relationship with demand and, therefore, offer them no value proposition. In contrast, SaaS-like networks focus on making transactions with suppliers as efficient as possible. This can be challenging, as decisions regarding payment infrastructure need to align with the company's long-term goals.

Payments also play a crucial role in building trust within the marketplace and enforcing policies that protect both buyers and sellers. Without a direct relationship with consumers, SaaS companies have limited branding opportunities. This can lead to confusion for consumers who may not understand why different suppliers offer varying levels of support from the company.

As companies move further to the right of the business model spectrum, they take on more responsibilities in managing the marketplace. This often requires additional financing to support the extra services provided. Understanding this progression is essential for making informed decisions about the future direction of the company.

In conclusion, startup priorities revolve around choosing the right metrics to track, building features that impact a large user base, and understanding the sequencing of business models. By focusing on key metrics, startups can measure their growth effectively and make data-driven decisions. Building features that have a significant impact on users and can be developed quickly and cost-effectively is crucial in the early stages. Finally, understanding the different types of marketplace business models and their progression can help founders make informed choices about their company's future.

Actionable advice:

• 1. Choose a metric that directly reflects your company's growth and focus exclusively on making that metric grow.

• 2. Prioritize building features that have a profound impact on a large user base and can be developed quickly and cost-effectively.

• 3. Understand the sequencing of business models and make informed decisions about financing and managing the extra services involved.

By following these actionable advice, startup founders can navigate the challenging landscape of priorities and set their companies on the path to success.