Reading about companies like Burbn who made Instagram, they have 4 employees and 5 million users. With no immediate plans to make money off the back of it.
What kind of person starts a business with no foreseeable plans to make money?
I applaud them if they genuinely love what they do and dont mind making something huge, for free.
Even Mark Zuckerberg (using my knowledge from the Social Network) was apprehensive about making money straight away, but at least he had plans.
This is a great question and here's my opinion.
Instagram is an exception to the norm. They don't have a revenue model in place, but they had a great idea at the right time and now have a huge consumer base. They will a.) be able to get a decent revenue model in place or b.) still make money through acquisition.
What you don't see is the thousands of other companies/startups that went to build and app without a revenue model. They don't see the success Instagram did, and they flop hard.
The ultimate indicator of success with a busines is profit, no one can argue against that. So start a company that's Boostrapped, Profitable & Proud.
by definition, business without a revenue model is not a business at all. You can call it a free service, an extremely popular social experiment, but not a business.
Therefore, you should never consider launching a free service with a plan to somehow monetize it later, because you might end up without a way to do that. You can always offer a free subscription plan with less options, a 30 day trial, or opt for advertising-funded business, but always know what value are you providing, to whom, and why will they eventually pay for it.
The bottom line is it all comes down to your priorities - if you want to create a popular free service, go ahead. But if you want to create a service which brings some cash at the end of the month, then you better think upfront how to monetize it.
For a great many startups,
plans_to_make_money = TRUE
plan_to_charge_today = FALSE Sometimes what's going on is that we're just putting off the moment of discomfort when we have to pause coding and get selling. If you've created something you know has value from day one, for people who have the means and motivation to pay, you should be steering hard to monetize directly from day one.
But sometimes we're not in that position. We don't know if we're creating value. Or that value may be very limited until we have tens or hundreds of thousands of users on board. In that case it makes great sense to maximize learning by minimizing friction. (It also makes sense to understand how you are going to manage costs during this phase).
Investors are very interested in evidence of traction. For a business service, that typically means demonstrating that customers will pay and stay. But increasingly in the consumer space, investors care more about volume and virality than direct income.
How does Stack Exchange make money?
Well, maybe they don't right now but they are building something of value. And for all I know it's possible they are making money, but that's not the point. Sometimes good ideas take on a life of their own and if they have value they will eventually be rewarded. And those ideas may be rewarded in ways that are not readily apparent right now.
How many people do you know that are in a completely different field than that of their degree? Lots. The reason is that life offers twists and turns that cannot be forseen. If you put yourself in a position to accept those surprises in a positive way then it turns out just fine in the end.
Going back to Stack Exchange as an example, maybe the phone will ring tomorrow and the person on the other end just loves the structure of their sites. That person might say, "I'm in the criminal justice field and have the perfect application for your structure". Talk about coming out of left field, no one could have guessed that call was coming.
So you never know.
It's ok to start a business with no immediately plans to monetize it assuming you are funding that venture some other way and you are cool with that. However, initially you should still have an 'out' or some planned way to generate revenue from the venture.
Usually it eventually becomes ads, affiliate marketing, acquisition.
In my company we have some services / apps that are designed just to get users so that we can market our other paid services to. Those business ventures independently aren't really profitable but they generate a lot of leads for our more profitable endeavors.
Have a plan to make money from it somehow, even if you don't chose to do it immediately.