There’s been some discussion on the American entrepreneur blogs about Twitter‘s business model. Apparently the discussion spread first on Twitter, then blogs started picking it, such as the CenterNetworks, A VC, Jason Calacanis and even Evan Williams himself (founder of Twitter).
The general concensus among the opinion seems to be that you don’t need a business model as long as you can scale and build a mass of million. Calacanis even goes on to say, “Running a startup is NOT about revenue anymore–it’s about critical mass.” However, in the next paragraph he states something that applies to Finland quite well, “…if you’re not a player like Ev, and you don’t have unlimited access to capital do not take this advice and focus on building revenue streams.”
The fact that venture capital is very limited in Finland, many Finnish startups need a viable business model a lot sooner than startups in Silicon Valley. I think this is something that European startups in general face a lot more than their US counterparts as our domestic markets are culturally very fragmented and thus building mass is more difficult in Europe.
In Finland, the most successful startups have had viable business plans and done relatively well revenue wise. Even if you look at the fastest growing startups that have been successful in the recent years, they have all had a business model in place. Dynamoid (ran IRC-Galleria), that was bought by Sulake, has a business model and it’s profit margins were in the 30s percentage wise (source). Sulake Corporation hasn’t been turning a profit yet, but has income in the millions (source). Another good example is Futurice (source). The only one that didn’t have a viable business model in place from the early days is Jaiku (easily comparable to Twitter), which was acquired by Google October last year.
So am I alone in my thoughts about business models and Finnish startups or is there someone who agrees? I am not judging which way is better – scaling or building revenue streams, but merely making a statement. Which ones do you see more viable or applicable in Finland/Europe – do we have a choice?
Update: Just wanted to add that all these startups I talked about above are internet companies. Futurice perhaps the least, but they do have business online.