DISQUS

powereverything · 8 months ago

For not very interesting reasons, I've recently been researching MCI in the late 70's and early 80s. This is not the stained MCI/Worldcom of the late 90's, but rather the company that drove the breakup of AT&T, bringing competition to the telecommunications industry for the first time and developed an email product that was connected to the internet in 1982. Though they had a culture committed to advanced technology, an approach they took to R&D was to say to various startups and venture investors that "if you can figure out how to solve XX problem, we will buy it for $YY millions. This had the effect of moving R&D out into the market place, scaling it, and driving innovation in their strategic direction. I dont think that MCI is the only company to have done this, but it seems to bring some symbiosis to the M&A field -- instead of startups trying to figure out how to get bought by MSFT/GOOGLE (and acquisition is almost always an exit strategy in any startup business plan) they can understand more clearly what products and solutions would be worth acquiring by their most likely buyers. So rather than helping a small company figure out their business model post-acquisition, a larger company can tell someone starting a company if you can do XX, that is a business model (or maybe more likely technology), we are interested in.

Engago Team · 8 months ago

It is not about finding a business model:
Anyone who starts an enterprise should start with a demand or problem of a market segment that your solution solves at a certain price.

Problem gets Solution @ Price

chudson · 8 months ago

I think it's always easier to start with some sense of business model from day 1. And I remain skeptical that big companies can help small companies figure out business models in new areas. Each case is different, though.

startupcfo · 8 months ago

I think Twitter may one of those "once in a decade" exceptions that defy the rules (Google being the last such exception). But in general, I think the days of big companies paying big ticket for startups without a business model are over. I'm sure if Google was thinking of buying Youtube today it would pass (or would have made a much lower offer)

chudson · 8 months ago

Thanks for the comment. The only thing that gives me pause with the line of logic above is the experience of Facebook. There was a window of time when people thought the upside was virtually limitless and the revenue piece would become clear at scale. Most "hot" startups have a window of time when the market believes the growth story and is willing to give them the benefit of the doubt on the revenue side. When that window closes, you'd better have a real model on which to rely.

startupcfo · 8 months ago

Facebook is another exception, or at least was till we started to realize how capital intensive it is and how hard it is to monetize. FB's reach still makes it a valuable target even though it sucks capital. Not many sites with its CPM rates would command the valuation multiples that it does.