3 startup models that can get funded

It’s usually during fund raising that I hit reality. That’s truly when I understand what the market is telling me. Until then, I live in this cocoon with my users and my team, thinking only about how to improve the product and make our users happy. My early assessment of the market today provides new startups with a few options

I. A start up involving currently trending technology (Crypto currency, Blockchain, may be at the tail end of VR hype, or some out of space crazy tech only Elon Musk will understand)

If you have spent the last couple of years in any of these industries, you are best positioned to start something and raise a shit ton of money for a half decent idea involving em. No one really knows what the future is for these topics so they are looking for ideas from you.

II. A start up that can generate revenue with an excellent ROI at a low CAC.

This seems obvious but it isn’t for most founders because it’s friggin’ hard to get this done. Given — It doesn’t matter what industry but if the ROIs are great, VCs will be interested. It could be the most boring industry ever but like I said, it doesn’t matter. It could also do very little with tech but there has to be some tech involved. Ex: Stitchfix. They probably have a lot of back end and intelligence but what you see in the front end is very little. But, majority of their workflow is still offline merchandising, etc.

Now, if you are thinking of choosing this path, you have to consider the following:

  • How can I reduce my costs mainly engineering and support costs? Remote teams…not engineers from the valley…Cross platform technology…simpler tech solution….etc
  • How do I reduce my CAC? Network effects…untapped market (highly unlikely…the only untapped market are the ones that don’t pay much and aliens…may be Elon got that too)…partnerships…competitive pricing (this is again dependent on reducing ur costs)
  • How to choose a paying industry? Keep shipping..Keep experimenting. This, again, seems easy from the outside. But, I think you need to work in an industry for at least 2 years to understand who will pay and for what will they pay? From the outside, it seems obvious that we would pay $10 for an uber ride but uber had to spend a few years in the industry experimenting with black cars, etc to figure out what consumers will pay.
  • What’s the TAM? Again, the best of us go wrong here. We define TAM very broadly but usually the actual TAM is a part of what you think TAM is. For this, again, you need to know what they pay for existing alternatives or how much they will save with your solution and multiply that with the number of potential users.
  • How do you truly feel about the industry? Are you passionate about this industry? If not, none of the above will work.

III. A startup with mad growth of users (every founder’s dream)

This is still true. If you are able to get to a million users very quickly and then to 10 million quickly again, even if you are clueless about revenue, there are ton of funds out there for you. This usually has to appeal to the fun side of your users even if it’s a productivity app. Ex: Slack. it’s fun to talk to all your colleagues about anything. So, everything including design needs to fun themed. And emojis. Yes, emojis. (Or if the target audience is a small segment of users (ex: Insurance brokers, real estate agents), adoption % & revenue per user are key! This kinda goes back to II)

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