Recently someone showed me a flowchart that tried to explain a new business model for the telecommunications industry. The many different companies involved and the complexity of money flows required quite some time of explaining and discussing until I was finally able to understand the idea.

My opinion on business models: Figure out a way to provide value to someone then they will be willing to pay for it. It helps to keep in mind that your future customers don’t necessarily need to be the users of your product or service. But this is as complicated as it gets. The lower the number of actors the higher the probability of success.

I stumbled on a comment on the EarlyStageVC blog, which summarizes the importance of simplicity of business models (in the context of entrepreneurship and Venture Capital:

“When a VC asks “What is your business model?” He’s really asking “How are you going to make money?” That’s what a business model is.

Simplicity is important. It reveals how well an entrepreneur understands his business. If you understand it well you can explain it simply. Most often it can be simplified. If it can’t then probably the entrepreneur doesn’t yet understand how he/she is going to make money. That’s where the VC works with the entrepreneur to figure it out. So the question is a litmus test in disguise.”

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I love this quote. It is from Steve Wozniak, co-founder of Apple Inc., describing the reason why he and Steve Jobs saved up money to move into their first office. This is just one interview that can be found in the book “Founders at Work - Stories of Startups Early Days”. Actually, the interview with Steve Wozniak is available for free here.

What is the most fascinating about this interview and the story of Apple in general is that it shows what is one of the critical issues when starting a company: you need someone, who is passionate about the product or service (Steve Wozniak in the case of Apple) and you need someone, who is passionate about selling the product and making money (Steve Jobs). If these two characters are combined something great can be established.

And this is not just a one-time constellation at Apple but a general pattern, that can be found in several other interviews in the book.
Go and read it, if you want to find out more about famous Silicon Valley startups.

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