Game Changing Business Models - MIT Portugal - 6/12/19

Proprietary and ConfidentialProprietary and Confidential
START UP
SECRETS
An insider’s guide to unfair competitive advantage
Disruptive Business Models to build Value
@underscorevc #startupsecrets
startupsecrets.com

What is a business model?
2

Business Model: Sustainability is key…
 What is your model for
• Creating
• Delivering
• Harnessing
• Sustaining
 VALUE?
4
3
Disruptive Business Models to Build Value @underscorevc startupsecrets.com
Value
Creating
Harnessing
DeliveringSustaining

Why is it so important?
4
New Market
& GTM
Disruptive
Business Model
Discontinuous
Innovation,
Defensible IP

5
New Market
& GTM
Disruptive
Business Model
Discontinuous
Innovation,
Defensible IP
Perfect Startup Storm:
• Time to market
• Market adoption
• Sustainability

6
New Market
& GTM
Disruptive
Business Model
Discontinuous
Innovation,
Defensible IP
Perfect Startup Storm:
• Connecting the dots for you
as an entrepreneur…
 Spend
 Cash efficiency
 Your ownership
 Valuation
• Time to market
• Market adoption
• Sustainability

HOW CAN YOU BE DISRUPTIVE
WITH IT?
7

How can your Business Model…
 Change the game?
 Rewrite the rules?
 Cause an innovator’s dilemma
 Be as disruptive
as your technology?
8
New Game
New playing field
New boundaries
New rules
YOU choose players

Symantec Antivirus for Mac (SAM)
Best seller – Licensed Product
Norton Antivirus for PC (NAV)
How to change the game
Best seller – Subscription Service
Ex 1: Symantec – many years ago (!)
Disruptive Business Models to Build Value @underscorevc startupsecrets.com 9

 Dramatic!
 Game changing
• Flipped the model on it’s head
 Competitors caught off guard
• Predictable profitable business model
 Led to solution leadership vs. battle: “Data Security”
• Customer need met more effectively
• More value extracted
• 1.5 product / seat => 2.6x
10
Results?

WHERE DO YOU START?

3 Steps To Disruption! (Workshop Agenda)
1. Breakdown the COMPONENTS of your business model
• Value Prop, Product, GTM, Profit
2. Breakout which of these is your C.O.R.E. VALUE / ADVANTAGE
• EG hardware, software, data, network, services
3. Brainstorm how you can DISRUPT with it
• EG unique functionality, co-creation, partner leverage, derivative value of data

3 Steps To Disruption!
1. Breakdown the COMPONENTS of your business model
• Value Prop, Product, GTM, Profit
2. Breakout which of these is your C.O.R.E. VALUE / ADVANTAGE
• EG hardware, software, data, network, services
3. Brainstorm how you can DISRUPT with it
• EG unique functionality, co-creation, partner leverage, derivative value of data

Where is your CORE value?
 Data
 Content
 Service
 Network
Disruptively monetize it!
• To your competitive advantage
• Where are others most vulnerable?
CORE
Cut to the CORE!

 Process or Product?
 Software or Services?
 Open or Proprietary?
 Content or Data?
 Freemium or Premium?
 Subscription or License?
Disruption– Sample Questions
CORE

 Shared ownership (Zipcar)
 Flash sales (Vente Privee)
 Crowd sourcing (uTest / Applause)
 Lead Gen (Mint.com / Intuit)
 Combinations
• Acquia - OSS, SaaS
• AirBnB - Commission on P2P rentals
• Demandware - SaaS, revenue share*
• Groupon - broker, revshare
• Spotify -ad-based, freemium
Sample Disruptive Business Models
*Acq by Salesforce.com for $2.8bn

Sample Disruptive Business Models
 Ollie: Shared Ownership with a premium -
Co-living spaces with amenities included in
competitive real estate markets.
 SkillShare: Crowd-sourcing and
Subscriptions – Crowdsourced skill classes
published and consumed by users.
 Venmo: P2P – Facilitates peer-to-peer borrowing
and payments
 Lambda School: Income Share for
Education – Coding and tech classes with no up-
front risk.
21

WORKSHOP

 Google Apps vs. Microsoft office (before it went to the cloud as Office 365)
• For each of them, what are the
 Components
 C.O.R.E Value
 Disruption
Example

WORKSHOP
Google Docs Microsoft Word
Value Prop
Product / Service
GTM
Profit
C.O.R.E Value
PRE cloud version

WORKSHOP
Google Docs Microsoft Word
Value Prop Word processing Word processing
Product / Service Online Installed
GTM Free OEM
Profit Advertising Licensing
C.O.R.E Value Collaboration Complete

Some Business Model Startup Secrets

 Lifetime Value of Customer (LTV)
 Cost of Acquiring Customer (CAC)
27
CORE
LTV ~3x >
CAC
Basic Startup Model

Multiply and Leverage your CORE
Multipliers:
• Increase revenue
• Increase reach
• Increase coverage
Levers:
• Reduce time
• Reduce costs
• Reduce resources
CORE
Levers
Multipliers
Startup Secret: Multipliers & Levers

Multiplier Examples:
• Sales & Marketing
– Tiered Pricing
– Freemium
– GTM / Channel partners
• Product
– Slippery products *
– “Russian Doll” Packaging *
– Whole product partners
Lever Examples:
• Sales & Marketing
– Web
– Inside
– Inbound
– Viral
• Product, Support
– Offshoring
– Outsourcing
– Crowdsourcing
– Co-creation *
– Technology stacks
* see startupsecrets.com
Examples in Software
Startup Secret: Multipliers & Levers
CORE
Levers
Multipliers

Multipliers:
• Increase revenue
through fuller
solution
• Increase reach
through their sales
force, channel etc.
• Credibility
Levers:
• Reduce time to market
• Reduced dev costs
EG: Whole Product Strategic Partnership
Integrate your CORE
into their technology stack
CORE
Levers
Multipliers
Services
Application
Data
Cloud
Get Multipliers & Levers working together!

 Create, Deliver, Harness &
Sustain
• While making it RSVP
 RSVP:
• Repeatable
• Scalable
• Valuable via multipliers and levers
• Profitable & Predictable
32Disruptive Business Models to Build Value @underscorevc startupsecrets.com
What makes for a GREAT business model?
Value
Creating
Harnessing

START UP
SECRETS
Case Study: Demandware’s Business Model
startupsecrets.com

Copyright 2012 Demandware, Inc. - Confidential
Demandware business model – simplified summary
• Create:
– Traditional R&D with leverage from LINK partners for whole product
• Deliver:
– SaaS = On Demand Commerce Innovation NOT Infrastructure
• Harness:
– % of GMV payment
• Sustain:
– Shared success

Significant Barriers to Entry
The Demandware CORE:
Merchant
Empowerment
Provides Full Control
Ease of
Development
Open Development Environment;
Flexible, Extensible
Cutting Edge
Access to Steady Stream of New,
Innovative Functionality as Soon as it
Becomes Available
Easy
Simplifies Complex eCommerce
Functionality
Fast Time-to-Market Only 6 Months
No Infrastructure SaaS Solution
Today’s DifferentiatorsInitial “Table Stakes”
Reliable and Proven
99.98%
Platform Availability
Fully
Customizable
+

Demandware LINK - Multiplier AND Lever
Benefits to
Retailers / Brands
• Accelerated Revenue Growth
• Rapid Access to Applications
• Reduced Implementation
Costs
• Early Visibility into Emerging
Technologies
®
LINK Technology Partners
LINK Technology
Partners
• Extensive library of pre-
built integrations between
leading third-party
technologies and
Demandware Commerce

Demandware: LINK program
• MULTIPLIER
– Creates whole product – fulfilling value proposition
– Extends whole product to broader solution
• LEVER
– Reduces cost of integration
– Reduces time to deploy
37

Leading Brands Choose Our Model
‘08
Customers
Websites
‘12‘09 ‘10 ‘11

Create, Deliver &
Harness & Sustain Value
Putting it all together
Value
Creating
Harnessing

Summary
 Disruptive Business Model – as significant as Technology
 Focus on CORE differentiation, use it to disrupt
 Multiply and Leverage it with innovation like strategic partners
 Make it great with RSVP: Repeatable, Scalable, Valuable, Profitable
41Disruptive Business Models to Build Value @underscorevc startupsecrets.com

START UP
SECRETS
Hi
Disruptive Business Models to build Value
Michael J Skok
startupsecrets.com

Game Changing Business Models - MIT Portugal - 6/12/19

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Game Changing Business Models - MIT Portugal - 6/12/19