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Revenues are oxygen for Startups.

Stashed in: Founders, @reidhoffman, Awesome, Revenue

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Meebo has 100 million monthly active users.

So why would Meebo let Google acquire it and shut down all of its products?

I found a clue in this article by Meebo's founder/CEO last fall.

In describing the job of the CEO of a 200 person startup, he never mentions revenues.

But revenues are oxygen for Startups.

Without revenues, Startups die.

Or get acquired and get all their products end-of-lifed.

Which is pretty much the same thing.

What do privately held startups like Square, Dropbox, Airbnb, Github, and Evernote all have in common?

All of them have significant revenues.

Good point.

So if revenues are the oxygen for startups, I have to question why the leading thought is to ignore revenues at the early stage and rely purely upon investment dollars while building traction.

Shouldn't iterating through revenue models be just as important as iterating through product/market fit at the early stages, while gaining traction?

Not quite.

A startup can only focus on one thing at a time.

1. First is product-market fit. Without that, there is no business.

2. Then there's growth. Getting scale builds a competitive advantage, especially if there are network effects.

3. Once you have a good product-market fit and growth, business model becomes your key concern.

Meebo had 1 and 2, but never figured out 3.

Then again, 3 is hard. Arguably, Facebook and Twitter are still figuring it out, as are Pinterest and Tumblr.

Yea, I get it. The thing is, we have more failures as an example with that model than successes.

It seems that (generally speaking) if we get product-market fit, and then traction, we eventually fail without a revenue model. Acqui-hires are the example (in most cases). So is the Meebo story.

So how to we help fix that problem?

I feel that blindly focusing on any one thing, for too long, is detrimental. Sure, it's great when you have the Rocky theme song playing in the back ground and you gotta knock something out. Focus is key. But it appears to be a hindrance if we do it to long. Like anything in life, moderation is key.

I've never understood why this mantra of "we can only focus on one thing" is so popular. My perspective is that it's not a rule applied 100% of the time. It's a strategy that is deployed when needed. It's a temporary tactic that helps us get to the next level.

I feel like we'd see more success out there if we didn't think of these things as a synchronous process...

You're right.

The Startups I mentioned earlier -- Square, Dropbox, Airbnb, Github, and Evernote -- reversed steps 2 and 3.

That is, they all figured out the business model and now are figuring out how to scale.

The only thing consistently true is #1 comes first.

Without product-market fit there can be no business.


Although most wisdom given is focus on distribution, I prefer Hoffman's advice: your #1 most important decision as a start up is your funding strategy. You can't focus on distribution (read: growth) without it.

Sorry the design of Pandawhale (again, Adam, May I help?) means I don't see there are other responses before I respond.

A funding strategy means just that-- you have to know how much money you have, how long a runway you have, and when you have to hit certain milestones like raising another round or becoming profitable. Once you know how you are going to pay how many, you can focus on the key goals like growth, etc.

Your business model could be raise a massive war chest and figure out how to be profitable later-- I think we've seen more than one of those.

If I recall correctly, LinkedIn was turned down by nearly every investor at the beginning.

Yes. 24 of 26 VC's said NO when Reid raised his "A".

The thing that killed Meebo wasn't its funding strategy.

Meebo raised more than $70 million dollars in multiple rounds led by Sequoia, DFJ, and Khosla Ventures.

So they had a massive war chest.

And they had lots of engagement. 100 million monthly actives.

What they didn't have was a good way to find a business model.

And that's truly unfortunate.

When Reid did raise money though, he raised as much as he could, and he did no his runway.

I agree with with product market fit-- they may have got funding, had enough runway but never really figured out product market fit.

We can now discuss if they spent enough time focusing, or if they failed ot pivot fast enough.

God, the ways start-ups fail is innumerable.

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