Comparing Early Stage Companies

How do you compare companies to create an index or comparable when they are different ideas and markets? It starts with comparing on Revenue Models. Revenue models are how you monetize your products or service and can generally be categorized into 16 types. The "bolded" are the first surveys that will be completed, starting with Subscriptions.

Revenue Models

  1. Services
  2. Commerce
  3. Subscription - Survey Here
  4. Transaction Fee/Rental
  5. Productize a Service
  6. Marketplace
  7. Lead Generation
  8. Gaming
  9. Advertising/Search
  10. New Media
  11. Coins/Tokens
  12. Multi-sided Marketplace
  13. Big Data
  14. Panels
  15. Licensing
  16. Combinations

Stage

One of the other factors of comparison is the stage of the company. For example, companies with <$1M in revenue are still figuring out how to monetize and track their key metrics. Companies with >$2M in revenue are dialing in those metrics and calculating investments in marketing and corresponding Return on Investment (ROI).

Capital Invested

Not all companies <should) take investment capital. when you take outside capital, you definitely take on the investors business model. Investors have an expected return timeline and use of capital expectations. For example, you can't shift into a "social impact" after the fact, e.g. commit a percentage of profit to a cause, when investors are expecting to participate in the profits.

History

While running the Seattle Chapter of the Founder Institute, I had a founder ask for a copy of my financial model. The problem was that their business was a B2C marketplace and my model was a B2B subscription. Though I could give them a copy of the model, they’d break it (and likely need me to fix it).

This lead to a study of 2,600 seed-funded companies – all to answer the question – how many templates would you need to build? Crunchbase provided the first list, with an 18-month look back on funded companies. That study has become a five-year longitudinal study looking at the success rates, the timing of fundraising and ultimately answered the question: how many revenue models are their anyway. The answer is 16.

Paid subscribers get access to the templates for free. There’s nothing worse than facing a blank “flashing cursor” on a spreadsheet.

In that time there have only been two real models launched – by the way if you find a new one, I’m happy to make it 17 or more! The two new models were:

  • Groupon – and the flash deal – ultimately this model pivoted to a combination of commerce and lead generation
  • Coins and Tokens – the jury is still out on this model and though it’s listed below the longevity is quite unknown.

Have you discovered a new or different model? Send it to me models@lumeric.com