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John Mullins
July-August 2013
By D.Ravi Varma (B605)
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About Author:
John Mullins.
He is a Standford MBA and Ph.d. At present he is the faculty at London Business School. His teaching subjects include Financing the entrepreneurial business, Business plan developement and many more.. Getting to plan-B was his major achievement.
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Toptomato.in
Hifives.in
Airbnb is one of the most celebrated start-ups of the past decade. In 2007 two design school graduates dusted off some air mattresses and rented out space in their San Francisco apartment to conference attendees who couldnt find hotel rooms, netting
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$1,000.
By 2012 Airbnb had raised $120 million in venture funding and
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Its a strategy more new businesses should consider: receiving cash from customers before having to lay out money for the product or service to be sold.(Negative Working capital).
One of the biggest benefits of doing so is that it allows company founders to focus on creating, testing, refining, and proving their business models instead of on courting investors.
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Customer-funding model is especially helpful when traditional forms of financing, such as bank loans, are tight, as is the case in many markets right now.
Some entrepreneurs avoid those traps by adopting business models that give them advance access to customers cash as a means of funding early growth.
Title
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In deposit model the company initially accepts deposits from public and render the services as and when recquired by the
customer.
A classic example is the travel start up Flight Raja (Now Via) which used this model . Initial deposit of $5000 from travel agents. Within 2 months it had signed up 180 agents booking 200
tickets a day.
After 1 year it had signed up 3000 agents in 290 cities.
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Newspapers and cable networks have used subsciption models for many years.
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Conclusion
Each of these models allowed company founders to launch with little or no external financing and to use the time not
Customer funded models dont suit every venture . Capital intensive projects that recquire manufacturing plants other infrastructure must almost always relay on traditional
financing.
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