Following on from Y Combinator's Demo Day yesterday I ran an analysis on the companies that presented looking at how they made money. I looked at two factors:
- Whether they were primarily b2b or b2c
- What business model they had (if any)
(this data excludes companies which didn't present "on-the-record" at demo day)
The definitions I used for classifying startups:
- Subscription - Startups that charge a regular flat fee (typically monthly) for their services, most typically SaaS services.
- Marketplace - Startups dealing with multi-sided markets where a commision is taken when participants on different sides of the market transact with each other.
- Advertising - Startups which generate money through selling advertising space or through lead-gen.
- Pay-as-you-go - Startups using metred charging models where users are charged based upon usage.
- Retail - Startups making one-off sales in the traditional retail transaction model.
The split between startups targeting businesses and consumers seems to be pretty even, in an article last month I covered how AngelPad strongly prefers b2b startups; this doesn't seem to be the case with YC.
Only a quarter of the startups that presented had no business model to date, although that rises to forty percent if you look purely at the consumer startups which suggests YC is still open to funding consumer startups that have the potential to be massmarket without a clear revenue stream.
Perhaps most striking was how popular the marketplace model is; historically YC have funded relatively few marketplace startups (presumably on the basis that the differentiator between marketplaces is down to traction and marketing rather than technology). However the huge success of AirBnB and other marketplace startups (Etsy, KickStarter, etc.) in recent years has possibly made them rethink their stance.
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