Ask HN: As a Founder, is this business model compelling?
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38In an overly simplistic summary, I am offering to work with companies under a performance-based contract that requires payment only when something is sold. It is backed by an agreement that is cancelable, with a 30-day written notice, if I don’t produce the agreed upon performance metrics. The macro trends that make me think this is an interesting approach in today’s environment are as follows:
1. Higher interest rates and less availability to capital is making seed funding harder to secure 2. Investors are aligning with more efficient and cost-conscious startups 3. Runway and cashflow are more important than ever because funding rounds are taking longer
So, do you think this is an interesting approach or am I missing something? As an aside, I have been a long time reader of HN and I am so grateful for the interesting, intelligent, and thought provoking comments. Thank you in advance for any you may offer to my post!
Most startups don't have product market fit. Further, most startups make things no one wants. The product might sound good to you and you will think "oh I can sell this", but you will work your ass off for no results.
They you may go back to the client and say "Hey the market doesn't want your product, they want this instead". Now you are doing free market research for them, and most likely, they won't listen to you anyways.
You may think "okay I need to be good at identifying startups struggling to sell who have products people want" and then you may realize there's a whole industry of VCs trying to do this, that mostly suck at it.
I think you'll find that young companies with products people want who are struggling to sell is extremely rare.
There's a reason the business model your suggesting isn't more prevalent with startups, and it's because sales skills matter far less than market fit.
Turns out that I hate sales. Not coincdentally, I'm also not much good at it. We talked to some marketing agencies, but all of them wanted flat fees, and none of them would consider "performance based" payment.
So, yeah. I wish someone like you had existed at the time.
However, for a company with PMF, if you have industry connections, and can help them get a short term boost of deal flow, I could see that being very attractive.
Helping first time founders setup any sales process at all can also be viable. You help them refine their closing process, hire on their team, and then move on.
They didn't understand our product and had no desire to understand our product. I advocated to end the contract with them, but management refused.
So I think I would want some verbiage in the contract that says I can just walk away if I don't think it is working out. I understand you need to protect your interest too, but I wouldn't want to get strung along by someone who is just not willing to put in the work.
I've played with the idea of this model myself, in the sense that it would be an interesting value-creating service. I'm open and also skeptical.
1) My product is software, you were in hardware. 2) Do you have a large existing rolodex? 3) How many startups do you plan on representing? 4) Where are you from & where are you located?
I'm not shy of talking to people. The biggest help for me would be prospecting and qualifying.
I'm in a rush, please reach out! Email in profile.
I might have tried a service like you're proposing when our company was very small.
Now that it's bigger, we have revenue goals that we need to hit, and I wouldn't want to hire someone for free to help hit important KPIs. If a larger company does engage with this model, it would probably be to supplement an existing revenue stream I would imagine.
I think the biggest risk with the model you're proposing is that it's more appealing to small companies who are more likely to not have reached PMF yet, and therefore have products that are more difficult for you to sell compared to more established companies.
It might work for a product that’s already found a segment and is looking for new markets.