Don’t define your business model too soon

Aren’t we in the business model generation?  Whenever an entrepreneur brings up their new venture, there’s always some smartass in the room who wants to question your business model.

Next time this happens, tell that spreadsheet jockey to hold his horses.  The business model is not the first thing on your things to do list when you start your new venture.

Fred Wilson does a great job breaking this down in a post he wrote in his blog titled: Product > Strategy > Business Model

Based on the title, you can see Wilson suggest that business model discussions should come only after the product and strategy are completed.  He states:

We have also had many portfolio companies build revenue models that did not line up well with the strategic direction. And in some cases, the companies really did not have a well articulated strategic direction at all. That led to a lot of wasted energy building a team and a customer base that ultimately was not of value to the business. We have seen teams walk away from parts of their business because of such mistakes.

If you don’t have a strategy yet, but have already decided on who and what you are going to charge for you product, then I suggest you go read both Fred Wilson’s post on this topic, as well as go read a follow up post from Mark Suster riffing on what Wilson shared in his post.

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