Stories and a Startup Secret from decades of business model innovation

It has been consistently proven over decades that business models will always be a critical element of any startup:

Back in the early 80’s, despite having created a Computer Aided Design system that was a breakthrough in ease of use and an order of magnitude better prices performance as a workstation solution compared with what were then minicomputer and mainframe based solutions, we met resistance selling to architects because they were not used to high Capital Expenditures we changed our business model and figured out how to lease the equipment to them. It changed the game and our business took off dramatically, seizing outsized market share and a leadership position.

When trying to sell Symantec / Norton Anti-Virus software in the early 90’s we realized it was not really the software people wanted but the ongoing protection from rapidly changing viruses. So we gave the software away and began to charge a subscription for the virus protection updates. Again it changed the game and we took the industry by storm, becoming the market leader, despite at some times, even having inferior technology!

When addressing the rush to eCommerce in the dot com era, Stephan Schambach, the founder of one of the first eCommerce platforms (Intershop) lost out to bigger players. So when we invested in his second business, Demandware it was because of his vision to make it a simpler SaaS solution avoiding the complexity of running the full commerce stack, something foreign to brands, merchandisers and retailers. Yet there were still many challenges with top brands trusting their shopfront to a startup. However once the business model was evolved to essentially paying a small percentage of the sales that Demandware was enabling online, the business took off, becoming a highly successful multi billion dollar investment outcome as a public company and eventually a billion dollar revenue company post it’s acquisition by Salesforce where it still prevails as their “Commerce Cloud”.

Drupal changed the game for people building websites from a closed source battle of feature functionality to an open source opportunity for anyone to create and integrate anything that helped serve customer engagement online. I was lucky enough to back the founder of Drupal, Dries Buytaert as he formed Acquia to commercialize and invest in the growth of Drupal. Open Source was disruptive but monetizing it required various evolutions of the business model for Acquia from Core Support (which failed) to PaaS (Platform as a Service) to SaaS with many Services, eventually creating a unicorn investment outcome and a multi hundred million dollar highly profitable business that continues to grow today.

In all these cases, the customer was being served the way they wanted to be served, with value being captured in line with their needs being met.

Startup Secret : By prioritizing the needs of your customers, you have the power to not only disrupt the industry but also establish a strong and defensible business model.