Read Jeremy Chone‘s post about “Are You a Seesmic or Balsamiq Entrepreneur?” today. I love Balsamiq Mockups and have been using it for more than 6 months now. Peldi – the entrepreneur behind Balsamiq, his blog and ideas were also an inspiration behind us starting AppsMagnet.
The question Jeremy’s asking is whether you are a “scale-first” entrepreneur or “monetize-first”. With scale-first, you would go capture a big market share and then think about monetization. With “monetize-first” you will ensure your venture is cash flow positive from early days. Your plans will focus on getting more money.
I prefer the money-first approach. Guy Kawasaki suggested it in the Art of the Start, and I have experienced that cash flows are one of the most important factors for a business. When you focus on getting cash every month, instead of raising external / venture funding, you are much more relaxed, have faster (instant?) gratification and are on solid ground.
This has been the driving factor for AppsMagnet too. We have sold 32 copies of our Reports module for activeCollab in about a month, and PlannerX has received very good reviews so far. As a matter of fact, we have many people looking forward to the activeCollab version of PlannerX!
What type of entrepreneur are you?
If I were an entrepreneur, I’d choose money first. I don’t see much appeal in having many users that won’t put a cash value on using my product. It’s odd that the article calls monetized first “life style businesses” — for me, it’s the scale first people who are in the game for the glamorous lifestyle.
There are a limited number of “scale first” businesses that can possibly exist — because by definition they need mass appeal, and nobody has more than 24 hours in a day to spend consuming services. So you can’t have more than 24 services consuming an hour a day of everybody’s time. On the other hand, there’s practically no limit to the number of businesses who can get £100 per year from a few thousand customers.
Scale first matters when you’re in a winner takes all market. I don’t think there are many of them, and on the Internet the incumbent position is far easier to attack than in real life (witness MySpace shift to Facebook, and now Facebook’s obvious and irrational fear of Twitter). Even Google would fall if something undeniably better came along.
You are bang on. I am a first time entrepenuer and focussed on cash flow from day one. I did not have to run to VC’s and this has saved us a lot of headaches.
Awesome!
What motivated you to focus on cash flows?