Three Buckets of Startup Ideas

I had a chat with a friend yesterday. We started throwing startups into “business model buckets”. And eventually, there were three.

1. Brains.
Aka returning users meaningfully contributing to your site and your treasure trove of data. These are behavioral change/shoot for the moon/change the world kind of ideas.

Monetization: Not immediately. Get the brains, hit critical mass, then your monetization strategy kicks in.

Style of product: Quora, Hunch, Likealittle, group chat applications.

Fundraising: Would be great.

Hiccups: Hard to get right. Need funding, unless you have enough to bootstrap the runway.

2. Sales.
There’s a demand for your product, and most likely from the long tail. You have to reach out to them and make sales. Your initial revenue is directly proportionate to your sales effort.

Monetization: Built right in. Most likely a tiered or freemium offering.

Style of product: Basecamp, DirectedEdge, Mixpanel.

Fundraising: Not necessary.

Hiccups: Heavy “door to door” sales effort, low profit per sale hour till the holy grail of critical mass.

3. Broker.
You’re a middleman. You connect supply and demand. Or even create them.

Style of product: AirBnB, Gigwalk, Grubwithus.

Monetization: Taking a cut of the transaction; built in from the start.

Fundraising: Would be nice.

Hiccups: Similar to ‘Sales’, possibly exaggerated due to the chicken and egg problem. Your length of boostrapped runway matters too.

Of course, after increased cash flow and users, the buckets start combining. That said, the type of idea you plays a part in what you initially decide to focus on. Don’t have a long enough bootstrapped runway? Devoting yourself to a ‘Brains’ idea may not be practical.

I’m sure these buckets are obvious to many of us. But it’s always good to revisit them as we think of our next big thing.