Business Model or Product First?

Posted by Jeff Lu on June 22, 2009

“I’m a huge believer in getting a million people, getting them engaged, and then building a business model on top of that. I knew I wasn’t planning on really trying to work on a business model until later.” – Reid Hoffman, CEO and Founder of LinkedIn

I got this quote from a recent CNNMoney piece on LinkedIn and struck a chord with me.  I feel like I’m meeting two types of people who work in and around Internet businesses:

1. Someone who believes that many Internet businesses have gotten away from running businesses with clear monetization models and are just great products (i.e. twitter, digg, facebook)

2. Someone who believes that the Internet is an opportune platform to build great products and if that product fills a need that’s great enough for enough people, the monetization model will naturally come

I struggle back and forth between the two and I think a lof of my closest business mentors fall into the first bucket, however I think I’m inclined to fall into the second.  Perhaps it’s the young idealist in me but I believe that successful entrepreneurs choose to venture out on their own for more than the monetary promise of a huge exit.  There’s a lot of blood, sweat and tears that go into building and growing a startup and entrepreneurs and their employees want to rally around businesses that has the promise to change the world we live in.  This might mean making it easier to connect to friends and coworkers (facebook, LinkedIn) or provide more affordable and easily accessible software (Salesforce.com, Solar Winds), in other words, it can change the world for consumers, businesses or both.  I know that the buckets don’t need to be mutually exclusive so a business with both a great business model and great product is rare and powerful.

I’m leaving Cascadia Capital soon to join the startup operating world.  I will be joining Healthcare.com as their Business Development Manager.  I don’t know if our product/service is prepared to change the world just yet but it definitely falls into the 1st category of having a strong business model.  I feel blessed with the opportunity I’ve been given this far by Cascadia to learn all that I have in the last 2 years and even more blessed that I will begin working with incredibly successful and smart entrepreneurs next month.

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