RevenueJay Jamison

Co-Founder & President, MoonshootFounder’s Institute – June 23, 2009

Microsoft 1973

My Thoughts on Revenue

Its Nice!

Keep It Simple

“Invest in businesses that an

idiot could run, because at some

point, an idiot will.”

Know What To Look For

1. Understandable business

2. Strong, passionate team

3. Defensible moats

4. Models that generate cash

Tonight’s Scope

Moats & Models

Moats (in 1559)

Moats (in 2009)Deliver users

something they want.

Build share & leadership.

Attract second stakeholder group to

reinforce value to users.

Improve value to users & repeat.

Users want PCs that are cheap, lots of

apps.

Developers need audience for their

products

WinTel gains share.

Developers build for

Windows.

Apple builds Iphone.

Apple offers developers a

platform.

Users drool & buy.

Developers build for Iphone.

Advertisers need to spend most effectively.

Google offers outstanding

search product.

Google grabs share.

Ad revenue funds

improvements in search.

Large user base & commissions draw

best teachers.

Users are drawn to

service with best teachers

20% royalty to teachers.

Teachers create and market

great classesMegastudy

Collect data on children & learning, reinforce value to

parents, educators, and children.

Build something

children love, parents value

Grow share & credibility

Reinforce core value with more

fun content, better results to

parents

Moonshoot

Attract another stakeholder to build

on your value.

Build something users love

Grow shareReinforce core value Your Company

Models—Part I

Types of Business Models

• Figure it out later / Ads

• Market maker

• Freemium & Subscription

• Virtual goods

• Price for product or service

• Others

Figure it out later / Ads

Examples Google; TwitterLots of others

Pros Focuses team on building awesome product

Cons Requires awesome user traction & retention.

AssessmentWorks well if you are “the future of x,” where ‘x’ equals something universal—e.g., communication, television, etc.

Market Maker

Examples PayPal; Ebay

Pros Your users make money through your serviceVery powerful

Cons Need excellent positioning & differentiation

Assessment Great work if you can find a scalable opportunity

Freemium & Subscription

Examples World of Warcraft, Club Penguin, Dropbox, Animoto, Salesforce.com

Pros Puts value on your service. Very crisp.

Cons Conversion, pricing may lack scale.

Assessment Think very hard about whether you have a good trip wire for value. (Animoto & Club Penguin)

Virtual goods

Examples Facebook apps, Habbo

Pros Shockingly profitable, can always add stuff

Cons Fickle

Assessment Cool to start, but have a strategy to extend.

Price per user or copy

Examples Microsoft Office, Enterprise apps, Iphone Premium Apps

Pros Crisp pricing and licensing model

Cons Not free for users, discounting

Assessment Works well for the right kinds of things.

Models—Part II

“Know Your Numbers”

• Ask tons of questions, do the analysis

• Connect with customers & market

• Build conviction that model works

• Close to pin works

Recent ExampleEntrepreneur’s Estimate to VC:

“Microsoft Small Business Server

has an Installed Base of 30M”

--Unsourced analyst

Jay’s EstimateM units

Total Server shipments 8.0

X86 share @ 90% 7.2

Windows Server share 70% 5.0

33% to small business 1.6

50% is Small Biz Server 800K

5 year avg lifespan 4m

VC emails me. Microsoft Small Business Server has an Installed Base of around

4M

Closing

Moats • ABC: Always Be Constructing

Business Models• Draft model should be in place ASAP• Monetization can be later

Industry Model• Always be hungry to learn more • But work to stay grounded in reality