Subject: Re: shooting holes in the sky
From: "Forrest J. Cavalier III" <mibsoft@mibsoftware.com>
Date: Tue, 09 Oct 2001 12:41:05 -0400

Tom Lord wrote:
> 	
> 	              Towards a broad class of FS Business Plans
> 	
> 	I find it easy to pay $10/month for a web site membership if the
> 	quality of content on the site is high and of interest -- even if the
> 	value received for payment is slight compared to what I can get by
> 	accessing the site for free. 

Out of curiousity, which non-porn sites do you have in mind?  Do you
subscribe to any?  Do you know of any you think are good that have
subscribers?

> 	
> 	At $10/month, you get over $1M/year in revenue for every 8500
> 	customers.

I am not a venture capitalist, but this is my understanding of what
they want....

VC want to see a placement into an established market, with well-defined
costs and benefits.  They definitely do not fund "first of its kind."

That established market should have existing revenues above $1E9 per
year in total among many successful companies.

They expect to put in on the order of $5E6, and see a solid
business plan that takes gives back $20E6 over 5 years, including
the IPO at the end.  Scaling up or down appropriately, but not
below $1M.

> 	
> 	As an example, let's aim for a measly 4*8500 or 34,000 paying
> 	customers.  That gives us a $2M/year budget.
> 	
> 	$2M is enough for around 6 senior level professionals, with cash
> 	equivalent to two more left over to just toss around (and pay hosting
> 	expenses).

What about sales and marketing, customer acquisition, retention
and the other costs?  You should probably be shooting for revenue
of $150E3 per person, so you may be in the right ballpark.

But do you expect 6 people to do a good job servicing 34,000 customers?!

You are expecting only low-maintenance customers perhaps?  With
34,000 customers some are going to lose passwords, ask questions,
be angry about a credit card charge.

> 	One idea is to start spending around $1M a year on a variety of
> 	different projects in this design space -- maybe 10 or 20 -- sharing
> 	some resources between the projects.  Plan to start opening up shop in
> 	about a year.

You can do a lot of code for $1M a year, but for marketing, you don't
get much.

I am not saying you don't have a good business model.  (Can you 
provide the numbers in the form LA suggested?)

You have not described the things that I understand VC look for.  (Maybe
they are there somewhere, and you haven't described them.)

Forrest J. Cavalier III, Mib Software  Voice 570-992-8824 

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