Customer-funded Business Models

Venture Capital > Best Practices > Customer-funded Business Models

Customer-funded Business Models
Paula Kokare, Project Manager, Switzerland, Premium Member
In his research, Professor J. Mullins (2014) argues that customer-financed business models provide an alternative source of financing for start ups. These models bring great benefits for start-ups compared to sourcing through external funding, e.g. financing with venture capital or crowd-sourcing. Mullins distinguishes 5 categories of customer-funded business models:
  • MATCHMAKER MODELS: businesses that connect buyers and sellers in the marketplace without owning the goods and services exchanged between the participants (e.g. airbnb, DogVacay). Matchmakers earn their revenue as a commission on the transactions carried out between the parties that exchange the goods.
  • PAY-IN-ADVANCE MODELS: businesses that persuad...Sign up

Limitations of Customer Funded Business Models
Gavril, Management Consultant, Albania, Member
I agree with Paula in principle. However, there seem to be certain limitations to using them: they seem to be a temporary solution and do not guarante...Sign up

Mullins ( Design by Swiss )
jayesh, Business Consultant, India, Member
How does this apply in a country controlled by very rich people and bureaucrats? Not all countries are the same neither are the people (especially cus...Sign up

2 More Customer Funded Business Models
Raj kumar, India, Member
@ Paula, adding to your point we can have two more models wherein customer can help in new product launch:
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Customer-funded Business Models not for Traditional Businesses?
Sandy Musallam, Editor, United States, Member
This concept although interesting, would be difficult to implement for tradional businesses, in my opinion. It might work only for manufactures of ver...Sign up

Problems with Customer-funded Business Models
Tom Lesnikowski, Business Consultant, Australia, Member
Whilst all five categories have their merits and applications in certain circumstances, they all have the risk that the customer can potentially domin...Sign up

When a Customer Funded Model Works
V.SHRIDHAR, Business Consultant, India, Member
I am New to Finance, I wish to share my experience as a manufacturer who has outsourced some of the operations for products. Customer Funded works whe...Sign up

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