Proven Business Models

This lesson is highly inspired by YCombinator's Startup School Business Models and Pricing Video. If you want to dive into the details and have 30 minutes to spare, I highly recommend watching the full video.

YCombinator (YC) is a famous startup accelerator program that founded over 3,000 companies since 2005. They have helped create some of the world's most successful and disruptive companies like Airbnb, Dropbox, Twitch, and more.

Recently, they did a survey of the top companies they helped create, and these findings could help you decide what business models to use for your company.

Of the top 100 YCombinator companies, here were their top business models:

1. SaaS (31%) - Software as a service.
2. Transactional (22%) - Enables various financial transactions and collects a fee from the customer in return.
3. Marketplace (14%) - Connects buyers and sellers, or two types of customers in a market.
4. Hard-tech (11%) - Organizations that create breakthrough and innovative products and which require scientific and engineering breakthroughs.
5. Usage-based (9%) - Offers a service to customers and captures revenue from them based on how much of the product they use.
6. Enterprise (7%) - A company that sells services or software to large companies/enterprises.
7. Advertising (3%) - Company offers a free service, then collects revenue from advertisements inside the service.
8. E-commerce (2%) - Sells physical/digital goods online.

What's not in the top 100 YCombinator companies:

• Services/consulting - Because it does not scale easily and does not have recurring revenue.
• Affiliate businesses - Because they are too far from the monetary transaction (in contrast - close to the transaction would be a financial trading company that helps people exchange cash for a fee).
• Hardware businesses - Because they require a lot of capital upfront and have low margins.
• Businesses built on other platforms - Because there is too much platform risk (think this: you create a successful app on the Apple Store, but Apple either shuts you down or collects 40% of your profit because you have to abide by their policies).

1. Startup Business Models and Pricing (Video by YC Startup School)
2. 10 Business Models That Will Inspire You (Article by What A Venture)
3. Startup School Reference Guide for Lecture #7 — Nine Business Models and the Metrics Investors Want with Anu Hariharan (Article by Dave Goldblatt)
4. Anu Hariharan - Nine Business Models and the Metrics Investors Want (Video from YC Startup School)