Ask HN: Choosing a business model
We think we've got a pretty solid service, but we're not sure which direction to take it. We see it going one of two ways:
# The 'Blackboard' Model:
I know everyone hates Blackboard, but no one can say their business model is poor. From our perspective, selling directly to schools (SAAS) would be good for 2 reasons: First, a guaranteed revenue stream. We sell to school A for $100/mo we KNOW we have that income. Second, the same as Blackboard, once you're in, it's hard to get pushed out.
The cons however, are very obvious: It's not 'ours' anymore, and it's not going to be easy to innovate. The business model is fixed, so if we have a smash hit, it's tough to cash in on it quickly. Also, we're stuck working at the behest of the schools we sell to. Not bad if we're making tons of money, but perhaps stifling to creativity, and annoying in cases of say... censorship.
# The 'Facebook' Model:
Everyone* who is currently in college has an account with Facebook. Facebook is HUGE and it doesn't answer to anyone but itself (and, sometimes it's users). The freedom Facebook has seems nice. We like this model because we keep control, and we can iterate quickly (we don't have to 'sell' new features). Also, we have the option to change things if the need arises, so in the case of becoming an 'overnight success' we can keep the money rolling in without having to worry about contracts, budgets etc...
Obviously the downside is the upside -- If we are a huge success, we don't necessarily have the means to support ourselves (Look at Facebook... the ads aren't cutting it). The freedom comes at the cost of security.
The reason we're looking at this is that we're considering some minor investments to get our company formed and to enable us to quit our day jobs (which don't make us much anyway as we're full time students too). We want to get a firm direction to take the app in before we present to the investors though.
I guess what I'd like to hear is, what do you guys think of each business model, and if possible how has either fared for you? I'm interested in any industry where similar setup exists, or perhaps even a hypothetical third model, apart from or combining the two above. Any feedback at all is much appreciated.