Some thoughts on "business models"

12 Nov 2015

Recently I decided to make my first angel investment to a company’s seed round. It was not a big amount of cash, but I just want to note down some thoughts for future reference.

What does the company do?

SketchDeck offers “on demand design services”, which you can see as “Uber meets Elance”. I generally hold back when I see companies have patterns of “A meets B” or “A for XXX (some sector)”, and this is not the first “design on demand” company that I have seen, but I eventually decided to back them. Why?

Why this company?

Let’s first take a step back to see why Uber worked but most of other “Uber for X” failed.

If there’s one word to describe Uber, that is “fast”, but not “cheap”, “comfortable” or anything else. How fast you can get a car? That’s everything about Uber. They were putting all their efforts on helping customers to get on a ride within a matter of seconds, so they try to turn everyone to be a driver for everyone else. Their mission comes first, and the solution comes second to serve the mission. Uber is not the first company doing this “shared economy” thing, nor the first one try to build the “find a ride” model, but the question is why other company (even Google) failed but Uber made it happen? The answer is Uber identifies that “time” is a very important factor that affects this whole sharing ride experience, and they did everything they can do to make it extremely fast.

Today’s Uber is not only fast, but also comfortable and cheap, and many people ride Uber because it’s cheaper than Taxi. But think about this: if Uber cars are low-end cars and not that comfortable, you may still ride Uber; if Uber charges you the same price as taxi, you may still ride Uber; but if you have to book Uber a few hours or even a day in advance, there’s no reason you still use Uber: you can call a taxi from a traditional call center and its much more reliable. Uber can be a bit more expensive, can be less comfortable, but it cannot be slow. Uber’s competitive price and comfortableness are just side-effects of it’s business model of “sharing rides”, and the model comes from it’s mission of getting rides lightning fast.

Uber wins because it bets on time, which is an important aspect in “find ride” user experience, and which traditional car companies can never achieve.

Take a look at many products today: “Uber for X”, “Airbnb for X” etc. It seems like their solution models come first but the companies don’t know what specific problem they are solving, and why people want it. It seems to me that many companies are using this “shared economy” concept to tackle every problem in every single industry – food delivery, home cleaning, grocery shopping, laundry, package shipping, moving, software programming, design, accounting&taxing, etc. But all of these experiences have their own specific set of factors, which need special tailored solutions and a lot of effort to make them extremely good. “Uber for X” is not a magic wand.

So, why this company??

Although SketchDeck sounds like another no-brainer “Uber for X”, I see it has a clear focus, which I think makes sense. SketchDeck focuses on making design fast, in a matter of few days. Because they want to make it fast, they built a layer between customers and designers – customers cannot specify who the designer is, they can only choose the experience level base on their need (expert, senior, junior, etc). Exactly like what Uber does with their UberX, BlackCar or whatever. As a result, they were able to make this design cost very transparent and flat.

This model makes a lot of sense to me. First, for customers like me, I have no idea how to pick designers base on their past design portfolio on Dribbble or Behance, all I want is finding someone with senior or expert level of experience; secondly, I don’t want to waste too much time to find & quote designers during rapid design stage; lastly, I don’t know what’s a fair price for design works. I have got quotes from few hundreds to 10s of thousands dollars. In one sentence, I want my design work done fast and in a fair price, so SketchDeck makes sense to me.

Lastly

Idea is very important when you build a company. Idea doesn’t come from the void, it should come from a real problem, and your business model is designed to address the identified problem and make money. Don’t be a no brainer and trying to copycat popular trends or patterns. It will always fail.