Trajectory: Startup: Ideation to Product/Market Fit - Summary and review

Parker analyzed 2564 companies, looking at every seed-funded company on Crunchbase and tracking the last 5+ years.Surprising finds:

• Of the failed companies: > 80% lacked a clear CTA, value prop, and pricing page

• Combinations models were the fastest to mature - to only pick 1 revenue model was not the most successful way to go

To increase likelihood we do the right thing from the start - it is important we know the main reasons why startups fail. Startups primarily fail due to 1. not serving a market need, 2. running out of cash, or 3. not having the right team.

These are the top 20 reasons for failing in descending order of frequency.

The book proposes the following aspects to look at, when determining if you are ready to pitch investors for venture funding.

• Team

• Idea

• Product

• Market/customer

• Competition

• Traction

• Timing

• Revenue model/finance

• IP/Moat

• Clear ask

Execution is crucial, but working on the right idea is just as important.When building a startup, at all costs, we need to be sure we have a clear why, just like Simon Sinek preaches in the world famous TED talk and book - “Start with Why: How Great Leaders Inspire Action”.

There are two main components when evaluating an idea:

• Pain level

• Willingness to pay.

These components are correlated, but you ideally want your idea to max out both of these. There should be a big existing pain for the customer, and they should be ready to pay for solving it.Your idea will change over time - as you validate and gain more tractionAn idea is different from a product. The idea is a abstract, conceptual and cheap to produce. Whereas, the product is concrete, actionable, and requires execution. Executing is expensive and takes time, so we want to make sure we are building the right product.

When starting out you don’t have the resources to work with multiple revenue models in parallel. So choose one carefully and stay focused. Further down the road one may stack multiple revenue models like Amazon and others have done successfully to generate more revenue. Here are the 14 possible revenue models presented in this book:

1. Fee for service: typically the model of consulting companies, hard to scale

2. Commerce: physical goods, wholesale, retail, etc. companies like Amazon

3. Subscription: forecastable revenue and high multiples, companies like Salesforce, Hubspot, and Spotify

4. Metered service: pay per use, favors B2B, companies like AWS, Splunk, etc. but also a common model for lots of PLG companies nowadays

5. Transaction fees/rental: take a cut of each transaction - companies like Kickstarter, Stripe

6. Productize a service: turn service into a product, offering is typically complex and requires services to deploy, companies like Moz

7. Combinations: several business models - can happen because you don’t know the ideal model yet, or when reaching scale you can expand revenue, companies like Amazon

8. Marketplaces: two sided market places that match buyers with sellers, companies like eBay, Alibaba

9. Lead generation: generate traffic, leads and conversions, companies like Mint.com, NetQuote

10. Gaming: entertainment and typically “hit driven” business - B2C audience, companies like King (with Candy Crush)

11. Advertising/search: B2B revenue - advertisers pay, users free, companies like Facebook, Google

12. New media: Networks with built-in virality, B2C, companies like Snapchat, WhatsApp, Clubhouse

13. Big data: Monetize data, companies like PatientsLikeMe

14. Licensing: Pay to use software - pre-subscription era, companies like Microsoft - Microsoft Office license or content licensing

Note that SaaS is not a revenue model, but rather a delivery mechanism. Dave Parker recommends picking a primary and a secondary business/revenue model.

How customers can buy. Typically 4 different ways:

1. Web direct - place the order to buy on the web

2. Direct - outbound sales - somebody has to talk to the prospect to complete the sale - inside/outside

3. Indirect/channel - doesn’t generate demand, but rather fulfills it

4. Retail - distribution, who else could sell the product? BestBuy, etc.

Watch The 14 Successful Startup Revenue Models and Key Metrics webinar by Dave Parker himself down below - it’s excellent: