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These 2 VCs explain the key to finding the right business model

May 25, 2018

In the journey of creating a new startup, founders have had to do six impossible things before breakfast. But according to these VCs, before anything else, finding the right business model is key.

Here’s their advice.

 

 
Devang Mehta, partner at Anthill Ventures

Founders should focus on two critical areas for their business model: their path to profitability and sustainable competitive advantage.

 

The path to profitability can be further broken down (and this is a bit of an oversimplification) into a repeatable sales model for enterprise/B2B startups, and sound unit economics for a B2C/ecommerce startup.

 

The logic here is that once you figure out these key metrics, you can execute these ruthlessly until you make enough money to cover your fixed and variable costs, and thereby achieve profitability.

For a sustainable competitive advantage, you need to understand your organization’s strengths and continuously hone them to achieve exponential growth.

 

What can founders do if their business model isn’t the right one?

They first need to understand if the model needs tweaking or a complete overhaul. Then, they need to display both the humility and adroitness to quickly pivot and mobilize organizational strengths toward more sustainable and profitable business models. These transformations frequently involve changing both the structure and mindset of teams.

 

Good founding teams can succeed without disrupting regular operations. The key is to effectively communicate a shared, ambitious vision, and outlining the new paths to achieve this goal.

 

How important is the business model when you evaluate a startup?

It is very important right from the first conversation, or rather, from the first read of the deck. The most important is for me to have confidence in the founding team’s ability to think through and articulate the business model to anyone on the planet.

 

Equally important is the entire team’s ability to recognize the need for a plan B/C; and the humility to change course. These pivots become necessary because of numerous industry dynamics.

 

Let’s discuss

  1. What are the things founders should be considering when figuring out a business model?

  2. What can they do when their business model isn’t the right one?

  3. How important is the business model for you when evaluating a startup? At what funding stage does it become absolutely crucial?

    First Published On: https://www.techinasia.com/talk/founders-find-right-business-model

     

    This is a Discuss post, where we feature short but insightful opinions from the Asian tech community on startup, entrepreneurship, and tech topics. Got a topic or question to suggest? Drop us an email or leave a comment.

     

     

     

     

     

     

     

     

     

 

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