Revenue Models An important element of new venture creation (as well as an opportunity for differentiation) is through the use of different revenue models (noting that the choice of revenue models can have a profound effect on various aspects of the business model). Here’s a list of 10 different revenue models that might be useful in fostering customer adoption of a new product or service, or creating a competitive advantage that existing players in the market will find hard to respond to: 1. Make the product yourself and sell it directly to a customer. 2. Make the product and sell it to a customer through a distributor. 3. Make the product and sell it (or license it) to an original equipment manufacturer (OEM) who will incorporate it into their product. 4. Provide a service and charge a fee for it. 5. Sign a fixed-price service contract and provide service when needed. 6. Give away a product and charge for service/support. 7. Provide a “freemium” service, where the basic service is free and users pay for premium features. 8. Provide a free service and charge others for access to information about who is using it. 9. Create an efficient marketplace for products/services and charge a transaction fee. 10. Turn a product sale into a service sale. — Dr. Andrew Maxwell , Chief Innovation Officer, Canadian Innovation Centre 3.3.3 Business Model Canvas and Lean Canvas People have been talking about revenue models, sales models and business models for many years. But without a clear consensus on what everyone was talking about, investors and entrepreneurs would miscommunicate. The important book that simplified these ideas, and which has provided a common language in the startup world, is Business Model Generation (Osterwalder & Pigneur). In this book, the Business Model Canvas provides an easy way to visualize and prove the major elements of a scalable and sustainable business model (www.businessmodelgeneration.com/canvas/bmc). The Lean Canvas is a modified canvas that was created by Ash Maurya for startup companies. It is similar to the original canvas but focuses more on the problem, solution, key metrics and competitive differentiation of the company. It is perhaps even more popular than the original canvas.
60 A Practical Guide to Angel Investing
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