A useful classification of online startups is to put them in two groups: Scale-First and Monetize-First. The first type is all about getting as big as possible, as fast as possible and then figuring out how to make money from the market. This Scale-First approach requires an often significant amount of capital to fund until either monetization or acquisition occurs. The other is about producing income as fast as possible and then using that cash flow to grow larger. This Monetize-First approach tends to be slower but comes with far less risk.

In his post Are you a Seesmic or Balsamiq Entrepreneur, blogger Jeremy Chone gives a good roundup of the pros and cons of both these approaches, using two well known startups as examples of each. Of course a brilliant example of the Scale-First approach is Google, who for a long time had a big question mark hanging over them regarding their business model. If you flip back to December 2000, you’ll find BusinessWeek published an article that literally had the words “But how will Google ever make money?”

Personally I fall most definitely in the Monetize-First camp. I like a business to be self-sustaining as soon as possible, and that means you need to have a clear plan from the out-set about how to actually make money. In startup literature this is called a business model and this post is all about finding one! Read More