How did Twitter/Quora persuade investors as they didnt/dont have a business model?
I wonder, how did Quora persuaded their investors as they don't make revenue and even they don't have any revenue model as far as I know.
The question is same again for twitter ( I know they sell features tweets but this feature didn't exist in the early stage of twitter)
Funding Pitch Business Model Twitter Fundraising
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Four Words: Jack Dorsey, Charlie Cheever – Hwrdprkns 12 years ago
2 Answers
At the most basic level, the argument to investors is "we are building something that millions of people will use. Once they do, making money is the easy part."
Which frankly is a valid argument. If you build something that everyone wants, money will find you. On the other hand, if you build something that is not really interesting to most (it's called a niche market), then you'd better have convincing unit economics that show you can still make a profit with a limited audience.
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I would say the same to the investors. However, I think there is something hidden in their story. Creating millions of people's demand is not hard. Like I can start a video-startup site in which i can stream all popular tv shows for free to people, and people would use it for sure. And all I need is a good amount of cash. But that doesnt prove this start-up can make money. Another example, twitter has millions of costs per month (just for servers) and I really don't think they really generate enough revenue to pay their costs. But they got another funding from an Arabic prince that is $300M. – To Rr0t 12 years ago
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Or I can make a website where you can stream music (like many sites around) for free and that would definitively take attention and would be used by millions of people. The problem is, I couldn't persuade myself, so how I would persuade someone else. – To Rr0t 12 years ago
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I think your number on Twitter is wrong, I'm sure they easily make more money than their hosting costs. And by the way, the Arabic prince did not invest in Twitter directly, it looks like he bought the shares on the secondary market - so it's a non-story. – Alain Raynaud 12 years ago
What Alain said, but only because in both cases the companies were founded by proven entrepreneurs / technologists.
With twitter, Biz Stone and Evan Williams had built and sold Blogger to Google.
Quora's founders were the CTO of Facebook and the creator of their developer platform; by the time Benchmark decided to invest, they already had a tremendous amount of the tech and social media A-list participating.
