Ever notice how startups almost never have sales people on their founding teams? Is it because they wouldn’t know what to do with them while the product is being developed? Or are their skills under-appreciated by engineers and other “traditional” founders (the “product team”)?
At this week’s Boston Web Innovators Group meeting the audience was introduced to thirteen local startups (“main dishes” and “side dishes”) who had made the cut and were given the chance to demo their products. For the most part they were all very impressive (who wouldn’t want multiple phone numbers on the same smartphone from Flyp? Or Rocketboard’s innovative whiteboard conferencing app?). However, very few of the entrepreneurs or their teams could articulate how they were going to make money. Some had raw plans for a subscription model. Only one that I spoke to, Weft, spoke about transitioning (pivoting?) from a bike-tracking device to a complete logistics-tracking platform, where they would be solving a need that people will pay for.
The question is “When is it too early to start thinking about our revenue model?” In my opinion, evaluating potential revenue models should be an integral part of the “Customer Discovery” process. While the product team is looking to find a core set of potential customers who will use the current product as it is defined, a start up should also be evaluating potential revenue models. There are too many clichés (“If we build it, they will come”, etc.) that point to the lack of respect that startups seem to pay to revenue models in the development stage. Founding teams shouldn’t be afraid to bring on sales talent early on (caveat – they should be sales reps who are comfortable operating in the startup environment). Pair the rep up with the product team to do discovery calls, and they will not only help determine what will sell, but will also get a jumpstart on defining the process and requirements for when they do start to sell the initial product.
In fairness, the presenters at the WebInno conference have poured their hearts into their products, and no doubt they have overcome some tough technical hurdles. And they are for the most part self-funded or seeded by angels, so they haven’t had to stand in the harsh light of day and answer potential VC investors’ questions about their business model. But that doesn’t mean they should get a pass on this. It is never too early to start thinking about a revenue model at your startup. That’s where the rubber meets the road. Without one, you won’t be able to execute on your vision.