1/11/2001C o n f i d e n t i a l 1ActiveIngredient

Business Modelsor

“Who Do You Want to Be in 2001?”

Tracy WeatherbyWeatherby@activeingredient.com650-965-1050

1/11/2001C o n f i d e n t i a l 2ActiveIngredient

What Business Models are What Business Models are Getting Funded?Getting Funded?

Businesses that can project profitability from a proven business model within a couple of years

“Monetizing” your idea

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What’s Not Getting What’s Not Getting Funded?Funded? Everything else

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Models Depend on Your Models Depend on Your Business & Your MarketBusiness & Your Market Software Hardware Content & Community Marketplaces Services Support

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Software Models – Sell or Software Models – Sell or license itlicense it By the package (i.e.,

shrinkwrap) Per processor Per seat Per organization Utility or transaction model –

pay as you go OEM

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Software Models - Rent Software Models - Rent itit Subscription (Anti-virus

software) Pure ASP / MSP / BSP (USi, Corio,

Applicast/Agilera, Portera) Monthly service fees With or without upfront costs

Monthly rental of enterprise software by the company who makes it

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Software Models - Give it Software Models - Give it awayaway Open Source / Shareware /

Freeware Sell the servers (Netscape

Navigator, Adobe Acrobat) Advertising (Driveway.com,

Homestead.com) Voluntary payments (McAfee) Sell support services (Red

Hat)

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HardwareHardware Sell it

Retail B2B Wholesale OEM

Rent it or lease it Give it away

Sell services or “razor blades” (Pitney Bowes)

Sell subscriptions (WebTV) Sell advertising (Free PC)

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Content & CommunityContent & Community Sell it

Individual articles or items One-time fee for total access

Rent it Subscription (NYT.com)

Give it Away Advertising (Yahoo – portals or

infomediaries) Direct marketing leads

1/11/2001C o n f i d e n t i a l 10ActiveIngredient

Marketplaces / E-Marketplaces / E-commercecommerce Entities buy products directly from

you (Amazon, Dell) Seller pays (eBay, Classifieds) Seller & buyers pay for access

(Match.com) Buyer pays (Buying Clubs) Affiliate programs – others link to you

(Amazon) Build your own marketplace for the

savings (auto companies) Sell the software & services to build

marketplaces (Ariba, CommerceOne)

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ServicesServices Sell it

Per transaction (brokerage, on-line photos, etc.)

Rent it Subscription (AOL)

Give it away Lead generation (but for

what?)

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SupportSupport Per incident Package of calls Yearly maintenance

contract as % of purchase price

Flat fee for yearly contract Different prices for different

tiers of support

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How do you transition How do you transition models?models? Carefully Thoughtfully Just once, if you can

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An ExampleAn Example Great technology in a competitive

market First: Decided to become a

software marketplace After market crash: Became a

services supplier to one end of the marketplace

After the 12/00: Went back to being a software service or product for which companies will pay