How are startups able to raise so much money these days without a revenue model?


1

There are so many startups that not only don't generate revenue, but also don't even have a revenue model in place. Yet they are able to raise tens of millions in Series A. Are we in another bubble?

Revenue Investors Series A

asked Mar 27 '14 at 12:12
Blank
Mark Green
50 points

2 Answers


2

Anyone who manages to raise funds has a revenue model they are sharing with prospective investors. Startups might choose not to pursue all the revenue opportunities at launch or even launch with a free product, but that doesn't mean they don't know how they could make money. Many companies choose to focus on growth for years and once they are a certain size, monetization becomes an easy problem to solve.

This is an excellent blog post from Andrew Chen that explains monetization: Stop asking "But how will they make money?"

We are now in a race for customer acquisition and winners are those companies who find the most cost-effective way to acquire and retain customers. Many industries have very low customer loyalty, so I think small companies have a chance to build brand loyalty by serving niche markets and through excellent customer service that large companies are infamous for.

answered Mar 27 '14 at 14:50
Blank
Webbie
2,835 points

1

One word: traction.

As long as you have a larger user base, it doesn't really matter if you make money, bleed money, or are breaking even.

A larger userbase is the hardest thing to achieve, figuring out how to make money from it is far easier in comparison.

answered Mar 27 '14 at 14:58
Blank
Rocco Schmidt
308 points

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Revenue Investors Series A