Business Strategy · Growth

Optimizing for revenue or user growth - what are your thoughts?

Lucas Hanson Looking for a partner to build awesome products

April 24th, 2017

Hi everyone,


I have a Chrome extension (TeamSync Bookmarks) that enables users to collaborate by sharing and managing bookmarks (anything with a URL). I'd like to get the community's thoughts on business models for a tool like this. I'm starting to make decisions on features (based on user feedback) that will begin to define the product more narrowly, and I want to have a better idea of a business model before investing more time. The goal is to exit through a successful sale ($100k or greater) of the business.


Speaking with other folks offline, here are a few options (that could be used in combination), and these aren't exhaustive. I know you all are awesome people, so I'd love to hear your thoughts. Thanks!

  • Optimize the product for user growth in order to gain a significant number of users (~1 million). [This assumes that a high number of users is valuable]
  • Optimize the product for growth and generate revenue through advertising
  • Charge a recurring $/user fee
    • Set up a limit to the number of shared bookmark folders a user can have and/or the number of users one shared bookmark folder could have
  • Charge a recurring $/user fee
    • Add additional features that are available for paid users
  • Charge a one-time fee per user
  • Etc...

Jennifer Ernst

April 24th, 2017

#1 & 2 are really the same. The reason someone acquires a company with a high number of non-paying users is to advertise to them. That's where Snapchat's value came from. 1M won't be enough users for an acquisition. It has to be a really high number of users or a really special demographic that has high value.


Figure out WHY someone would buy your business for $100k or greater rather than just program the feature into their product. Think about integration with other products and what users will be using when they NEED to share bookmarks.

Vlad Khomutov Founder @ Fast Venture, Founder @ Propel Digital, Co-Founder @Webreel, Co-founder @Fitland

April 24th, 2017

Who would pay for bookmarks tool that only works as an extension in one browser? Find out who these people are, and talk to 100 of them. If they say they would pay for it, charge them. If they say they won't pay for it, your product doesn't solve a painful enough problem, so I would drop this idea and find a problem that hurts people enough they would pay some money to get rid of it.


Don't do ads. You need millions of users and hundreds of millions of views to make any real money and you will fold your company years before you even reach half way point, if you rely on this revenue source.


Monthly / one time fee: it depends on your customer LTV. If you don't know your customer LTV, start with low single payment. If you can't get people to dish out a few bucks once, you won't get them to dish out a few bucks every month.


I don't see anyone buying a Chrome extension.

Companies acquire other companies for following reasons:

  • Extend product offering (e.g. I'm a farmer VC. I have a potato startup, a hot pepper startup, and a chicken startup. I know my customers want tacos, so I will buy a corn startup and a tomato startup, so I can "package" it all and make tacos cheaper than sourcing all these ingredients separately. This is what Sales Force likes to do with smaller tech companies).
  • Engaged customers. If I sell salsa, I need to have a list of people who need salsa. If you own a taco business, I will buy it to get access to your customers, to whom I will sell salsa). This is why Facebook bought Instagram and Whatsapp.
  • Future revenue. I will identify a good idea in it's early stage, buy it out before it becomes a threat, and using my well-oiled marketing machine, grow it by 100x, under my own brand.
  • Talent. Also called acqui-hire.

If you have an idea who might buy your company, try to see which of the above strategies would make sense for them, and optimize your business for it.


Cultivate relationships. Selling companies is not like selling your old iphone on Craigslist.


Hope this helps!

Marius Kurgonas Visionary entrepreneur

Last updated on April 25th, 2017

Lucas,


In startup world everyone husles to get users all the time, and 1 million - is nothing. Getting more and more customers is each business's struggle all the time.


And talking about charging - you will have to find what your customers are willing to pay and for what through experimentation. Just run experiment after experiment and analyse after each one, and finally when you find something that works - ride it as long as you can.


Regards

Paul Ryan Cofounder and CEO of Just a Baby

April 24th, 2017

i like this post, (i a not affiliated with them) which says to get traction first, then monetise. I agree. If you monetise something without traction, you are kidding yourself and potentially wasting time. With some trial and error, you can monetise anything on a small scale. Traction is the magic ingredient. http://fundersandfounders.com/how-to-raise-money-for-your-startup/


Lucas Hanson Looking for a partner to build awesome products

April 25th, 2017

Vlad, Jennifer, Marius, and Paul, thank you for the comments!