My 2 cents on this topic:This is probably the hottest news we’ve heard in a while. So good that it has managed to topple whatever Arvind Kejriwal did today from the top of my news feed[For Indian readers only:) ]! While the acquisition is great news for the WhatApp team and a story all start-ups can draw inspiration from, I’m getting a bit annoyed at some peoples’ view about what the learning from this episode is.
“The main lesson is not to think about money too early. Build a customer base first, then think about revenue”
This is probably the most common lesson people are drawing from the Whatsapp story. But isn’t this obvious? This is probably the 1st sentence of Start-up 101. The real question is, how many start-ups can afford to wait that long?
A few years back when Jack Dorsey was asked how Twitter was planning to monetize, he coolly replied “We’ll figure something out”. Twitter eventually conceptualized ‘Promoted Tweets’ and ‘Promoted Trends’ and are minting money through that model. By the time Dorsey made that statement, Twitter had already accumulated Millions of users and their valuation was going through the roof. VC’s were more than willing to take a Billion dollar exit a few years later than a few hundred Million immediately. All start-ups are not that lucky.
Founders are always optimistic about their venture(as they should). They always believe that their company is the Next Big Thing. They want their users to have the best experience using their product and make it go viral. After all, monetizing your product leads to slow growth(charge your users –> slow growth, put ads on your product –> bad user experience –> slow growth), a lesson everyone knows about. So, let’s not make money just yet. Simple!
Every once in a while, founders need to take a reality check. Not every company goes on to become Twitter or Whatsapp. Not everybody will be as optimistic about the outlook of a company as it’s founders. Investors(and the outside world) may not believe in the company as much as the team. We can take the case of iStream.in that closed a few weeks back. Despite having a good user base, they weren’t able to generate steady revenue.
To sum it up, “To monetize or not to monetize early, is the question”.
“Do you really have a choice?” is my answer