They are the business model generation. Their minds have produced a number of business models radically different from what existed before, through startups.
By
Andreas Maryoto
·4 minutes read
They are the business model generation. Their minds have produced a number of business models radically different from what existed before, through startups. In the running of their businesses, investment, production and making money are not enough. The presence of digital technology has helped them create various complicated business models. Today, however, a bigger set of challenges awaits them, namely funding that may very well determine their fates going forward.
Thus far, people only understand that many of them are “burning money” to run their businesses. Billions or even trillions of rupiah are disbursed to fund cash-back programs, discount promos and subsidies to attract customers to use their products – a strategy known as customer acquisition. However, this is just one business model developed by millennials born between 1980 and 1999. In 2010, Alexander Osterwalder and Yves Pigneur collaborated with hundreds of international experts to compile these various burgeoning new business models in the book Business Model Generation. Now, many more variants of business models exist.
The business model trend emerged in early the 2000s as many more were gaining access to digital technology, which strongly affected the business world. Customer acquisition, for example, might have taken a long time using the old business model. However, when using digital technology, it could be achieved in a shorter time period. The free-service business model also mushroomed, and people soon found out this was not the core business. The services were only the gateway to gain data. Big data was then used to build the real business, such as seeking revenue through ads.
Google, for instance, provides a free search engine service. However, its real business lies in collecting search data, which is used to make better-targeted ads. They gain revenue from advertisements, among other sources. Amazon sells various products but their other businesses, such as finance and health, are based on commerce and search traffic data on their web-based platform.
In the business model trend, people are passionate about various new ideas. With new ideas in their mind, they seek investors. These investors do not want to lag behind the latest trends. They no longer focus merely on real and concrete investment. Today, they also invest in ideas. Events are held to facilitate meetings between startup
founders with fresh ideas and potential investors. Five-minute speed dating events are gaining popularity. Presentation is an important weapon for founders in proposing their ideas. Funding from seed to Series F reflects the valuation of these startups.
However, investors’ passion to invest their money in startups plummeted after Uber had its initial public offering.
However, investors’ passion to invest their money in startups plummeted after Uber had its initial public offering. The company’s stock value has continued to decline from US$45 in May 2019 to US$34 this year. Another startup, WeWork, cancelled its IPO due to an extremely weak response in the private market. An unclear business plan and WeWork’s way of resolving company problems have yet to satisfy potential investors. As a result, investors worldwide are showing restraint.
In Indonesia, the latest reports also show that investors are becoming more wary in disbursing money. Financial institutions are choosing to cancel their involvement in syndications or reduce their role by decreasing the amount of money they invest in startups. Consequently, startups, especially those still in the development phase, are saying that they are in a difficult position. They still need a huge amount of funding to develop their businesses. This situation must be observed as startups have thousands of workers. Furthermore, they are disrupters in the business world. They are innovators. When their funds dry up, they can wither and die before having the chance to bloom.
On the other hand, startup founders also need to foster better businesses. They can no longer rely on valuation. Business projection and clear and healthy growth can brighten the future of business disrupters in the nation.