#12- The New Business Model is to 'Enable Newer Business Models'
How new startups are making it easier for people to run unconventional small businesses, and why is this business model here to stay?
I really like learning about new business models, and of late I’ve been really reading about new business models like Shopify, Substack, Anchor, Zoom, and the likes. What is really interesting about these companies is that they’ve not only taken professional businesses onboard but also created a new crop of unconventional small businesses that run their entire business on these platforms!
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Let’s take a look at Shopify
Shopify makes it easy for companies to sell their goods and services online. It is easy to set up and use, one can create a visually appealing store, there are hundreds of integrations that allow streamlines operations, there is security and reliability regarding personal and confidential information, the web and mobile pages are exceptionally responsive, and the store owner has powerful marketing tools at their disposal.
The platform is so diverse and valuable that not only do behemoths like Budweiser, The Economist, Tesla (up to 2017) use it, but you can also find your neighborhood mom setting up her craft-shop on Shopify.
One of our portfolio companies that started off as a home-business on Shopify, created their entire healthy snacking e-com website on the platform. And now, despite raising growth capital and having the resources to set up their own website, and an omnichannel approach, they stick to Shopify due to the ease of use and plethora of analytics the store provides them that helps generate close to $25,000 in monthly revenues from the website alone!
Why is it here to stay?
Put simply it is easy to use, provides invaluable analytics, doesn’t cost a lot to set up, and takes just a fraction of the sale proceed thereby making it very flexible for anyone to start selling quickly!
Let’s look at Substack
The resurgence of email newsletters is astounding! Wasn’t email dead until a few years ago? Nonetheless, people are trying, and are also successful, in creating an entire business model off of Substack!
Let's face it, an email newsletter isn’t something new. Even before Substack, people used to run their own newsletters. The differences being - creating and hosting on WordPress by yourself, organizing and sharing via Mailchimp, and using a third-party API for billing and management. Substack did not do anything new- it just bundled it together and started giving it for free to newbies! By only charging a commission for paid newsletters - it also “variablized” the costs for the author, and reduced the friction for someone with intent to start and create their own free newsletter, to begin with. No fixed costs mean an extremely scalable business model. We learned last week how Overheads = Death for your business.
Today there is a rise in a growing class of newsletter entrepreneurs on Substack that have started their own newsletter subscription business!
But its not just for budding bloggers. The Dispatch - a news organization completely built on a Substack partnership - has even crossed $1mn in annual revenues.
Blogging is serious business!
Why is it here to stay?
Anyone can start a newsletter on Substack within 5 minutes. It is as easy as typing a word document. At the click of a button, you can publish your blog and send the newsletter via email. There are no fees to start a free newsletter, and Substack only levies a 10% fee IF you elect to start a paid newsletter. All in all, making it very easy, and cheap to start publishing! One drawback is no custom domains, something that they ‘might’ restart in the future!
Finally, let’s look at Zoom
Yes! The pandemic has made Zoom calls akin to maintaining our sanity. Even Governments, Fortune 500 companies, and other larger players in the ecosystem have started using Zoom (or alternatives like Cisco Webex, Google Meet, etc) on a regular basis.
But there is a new crop of entrepreneurs that welcomed this opportunity to start using video calling as a medium for conducting their business! See for yourself how this fitness instructor has started offering 1-1 and group sessions on Zoom! Another fitness studio understands how not every studio will re-open post the pandemic, and how not every client will want to go to a studio/gym to workout, and hence created a course on how to start an online studio.
My firm also works with an investment facilitator/syndicate with 1000+ members that works exclusively on Zoom to screen and evaluate incoming deals in the VC ecosystem. So far, it has worked very well for them!
Why is video calling here to stay?
This does not need any highlighting from my end. We have all started to appreciate the value of a video call. Something to monitor will be - how entrepreneurial people start and run their businesses purely on video calls!
Closing comments
The most exciting part of these new business models is that they are not intrusive, and do not require sophisticated end-users. But these platforms make it very easy for simply anyone to start their own small businesses without much friction, they enable their users to make money by providing a valuable platform and analytics, and being very low-cost, give a very high ROI. Why wouldn’t anyone want to keep using these services?
Put simply, the future is of new business models that help enable newer business models to flourish!
For founders creating new platforms, this is a very important learning. Your success lies in other people’s successes! Adding value makes you invaluable.
Additional reads
How to use Telegram to grow your membership business?
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Good one Sid... As an investor told me once, success for an entrepreneur lies in making her customers successful!