Subject: Business models: Ben & Jerry's or Amazon (was Re: low signal)
From: "Karsten M. Self" <kmself@ix.netcom.com>
Date: Sun, 28 Oct 2001 14:30:21 -0800
Sun, 28 Oct 2001 14:30:21 -0800
on Sun, Oct 28, 2001 at 03:04:13PM -0500, Russell Nelson (nelson@crynwr.com) wrote:
> Chris Maeda writes:
>  > The investment community only cares about highest risk-adjusted
>  > return in the shortest time.  You have to show how an FSB can
>  > achieve this in order to get funding, not that some other set of
>  > criteria is more appropriate.
> 
> Well, no, he doesn't.  Cygnus was funded by its founders and by
> internal reinvestment.  And I believe that the last quarter Redhat
> made a profit (EBITDA aside), it was owned in the same manner.  Why
> are people acting as if a company cannot grow purely through
> self-funding?  Such a company cannot grow quickly, true, but it can
> grow.

Incidentally, Joel Spolsky wrote a really nice essay May 12, 2000, on
growth strategies of companies (Internet or otherwise).  His comparison
was between Amazon and Ben & Jerry's, the choice being between "get big
fast" scenario, and a slower, self-funded, organic growth.  

http://joel.editthispage.com/stories/storyReader$113

    Strategy Letter I

    Fri, May 12, 2000; by Joel Spolsky.

    Building a company?  You've got one very important decision to make,
    because it affects everything else you do.  No matter what else you do,
    you absolutely must figure out which camp you're in, and gear
    everything you do accordingly, or you're going to have a disaster on
    your hands.

    The decision?  Whether to grow slowly, organically, and profitably, or
    whether to have a big bang with very fast growth and lots of capital.

    The organic model is to start small, with limited goals, and slowly
    build a business over a long period of time.  I'm going to call this
    the Ben and Jerry's model, because Ben and Jerry's fits this model
    pretty well.

    The other model, popularly called "Get Big Fast" (a.k.a. "Land Grab"),
    requires you to raise a lot of capital, and work as quickly as
    possible to get big fast without concern for profitability.  I'm going
    to call this the [14]Amazon model, because Jeff Bezos, the founder of
    Amazon, has practically become the celebrity spokesmodel for Get Big
    Fast.

    Let's look at some of the differences between these models.  The first
    thing to ask is: are you going into a business that has competition,
    or not?

    [...]

Good reading.

Peace.

-- 
Karsten M. Self <kmself@ix.netcom.com>       http://kmself.home.netcom.com/
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