Friday, January 16, 2009

New Business Model for Internet start-ups?

The New York Times reports that venture capitalists now are looking for internet start-ups that make money in ways other than selling ads, like selling subscriptions or virtual goods. Internet start-ups have so far been characterized by a very few, very popular companies often financed by venture capital firms using a blockbuster business model.

An interesting thing I have noticed lately among software developers is a rather sophisticated portfolio approach to Internet projects. Young entrepreneurs and developers that previously focused all their attention on one project trying to get venture capital or other funding, instead run several smaller web projects with different objectives in mind without any external funding. Some projects, often blogs or smaller information sites, have the objective to generate small but passive and steady revenues using advertisement or other business models for blogs and websites. A Passive Business Model is a model in which limited work is needed to generate additional revenues once the investment (development) is made, thus enabling the owner to develop other projects while continuing to have revenues from the existing ones. I have met developers that have many smaller projects that together generates a full salary. Having a diversified portfolio of projects the developer reduces the risks if one of its projects would stop generating revenues. Funded by the more Passive Business Models, the developers have one or a few more advanced projects with higher risk (more time put into it) and higher potential reward.

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