Making Money in Technology
After the Bubble, page 14
Business Plans and Business Models, continued
What is the customer supply chain? In other words, does the product move through a line of intermediaries?
Each intermediary node on the supply chain needs to be evaluated like a customer.
What are the metrics of customer acquisition? How much does it cost to get and keep a customer?
How much money can be made off each customer? What is the average customer lifetime?
A business plan and model that takes customers and competitors into account in a rigorous and
common-sense fashion is likely to succeed.
Funding and the New Order
The message to entrepreneurs is discipline, conservation of capital, and a clear road map leading to
profitability. How does this translate into funding opportunities?
First, the enthusiasm among private investors has declined. This means that seed funding is harder to
obtain. Many private investors are focusing on “surer things”—meaning later-stage investments. (Of course,
an implication of this is that early-stage investors can and should be more highly selective.)
In the venture capital world, professional VC firms are investing in fewer deals, and deal size is smaller.
While VC funds have lots of liquidity, the prospect of raising future funds right now isn’t very good.
While most VC firms were touched to some degree by the meltdown, those that concentrated on
business-to-consumer content sites were hit worst. (Business-to-business companies are not far behind as
terrible investments).
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