The Customer-Funded Business

The day you take a dollar or pound or rupee of venture capital is the day

But users or members don't pay the bills. Customers do

Entrepreneurship is the art of staying alive until you get lucky!

Disrupting a market is easy to talk about, but difficult to deliver.

accumulated expertise to deliver packaged solutions that stand on their own, able to be used or consumed by the customer largely without seller support.

As we'll see in this chapter, though, starting a services business and eventually transforming the services into marketable products that can stand on their own is a customer-funded, cash-efficient way to start a products business, too. Just ask Bill Gates and Paul Allen. But before we examine Microsoft's customer-funded origins, let's make clear exactly what we mean by service-to-product models: Service-to-product models are those in which businesses begin their lives by providing customized services—to meet customers' varying needs—and eventually draw on their accumu

First, at the heart of the scarcity models we've seen in this chapter is the truism that the customer must pay long before vendors are paid. Unless growth is pursued at a lightning pace, that condition is likely to be sufficient to customer-fund a scarcity-based business for some time, with one caveat: The margins that the business generates must be sufficient to cover the day-to-day costs of running the business and generate profits, too. It's easy to be blinded to the profit reality in a business where the customers always keep it flush with cash. But sooner or later, profits will be essential.

The vast majority of them, however, didn't follow the prototypical path that the conventional wisdom holds as gospel today:
Step 1: Come up with an idea for a new venture.
Step 2: Write a business plan.
Step 3: Raise some venture capital.
Step 4: Get rich

journey—from a much more hospitable and agreeable source: their customers.
“they didn't mortgage or pledge their houses, either.”
The Problem: Limelight Stolen
“Why, then,” you might ask, “have the business plan and the raising of venture capital become seen as the centerpiece of entrepreneurial endeavor?” Two reasons, in my view.
First, the venture capital community—VCs, business angels, incubators, and much of the rest of today's entrepreneurial ecosystem—has stolen the entrepreneurial finance limelight over the past two generations or so, first in California and Boston, and more recently practically everywhere else. They've done so for good reasons: the sometimes astonishing returns they've delivered to themselves and their investors, and the astonishingly large and valuable companies that this ecosystem has created. The valu