Profit vs Vision — Two kinds of start ups
We need more Italian Restaurants on the Internet
“I think there’s too few people trying to make just a nice Italian Restaurant in the web space.” https://youtu.be/0CDXJ6bMkMY?t=12m26s David Heinemeier Hansson believes more internet businesses that start out should try to be like an Italian Restaurant. That means to run a business which creates real revenue or better even profit right from the beginning and ideally has a concept that is proven to work. Too many businesses on the internet start out with the idea that „revenue doesn’t really matter“ and therefore get addicted to VC money instead of figuring out a way to make money themselves from their clients. Everybody wants to be the next Facebook or Twitter, while the chances of this happening to your start up are almost like winning the lottery.
Two schools of thought for start ups
Joi Ito on the other hand, promotes a totally different approach https://youtu.be/bJy_FP0SSQI?t=1h22m20s. Ito says “The traditional obsession with the so called business model […] is a short sighted focus”. The idea is to tackle a big problem, solve it convincingly to reach scale and sooner or later you will find people willing to pay for this solution. Accordingly being concerned with generating revenue too early on prevents you from finding the best solution to the problem.
These two approaches to internet businesses appear to be on opposite ends of the spectrum. You either build a business that has a clear business model with the goal of generating profit. Or you build a solution to an idea which doesn’t generate revenue, let alone profit, but which you can later turn into a business.
The multiplier effect by the huge market on the internet can even make founding a normal business a very profitable and rewarding endeavor. But solving an important problem with the prospect of making big money as a reward seems more tempting to many. It doesn’t only come with the monetary reward, but the social recognition awarded by society to someone that made a big contribution. While just making money with a business is less glamorous, it seems more attainable.