Unable to solve their impossible problems, VV and Rza went for a stroll. They parked their bikes under eucalyptus in front of a winery conference center miles down the California coast. It was not a random stop. They knew that FundersPlatform, a rival to startups AndFound, was holding a networking event there, and they were wondering what kind of crowd it was attracting. They soon found out. WV! Consent! What are you doing here?" It was their old friend Cynthia Finlay, a well-known angel investor in Silicon Valley. "What are you doing here?" asked VV. He assumed that FundersPlatform wouldn't be able to attract high players like Cynthia. Riza also looked surprised. He looked down and got busy on his bike

Just because I love you and your site doesn't mean I'm ignoring what's going on, she replied. These guys do a good job of matching us angels with promising start-ups. It's like speed dating. I must have talked to 20 entrepreneurs today. But don't worry, he added. They're not a threat to you. The fees are killer - thousands for companies, $500 per deal for investors. They'll never be able to compete with free! Free. That's the rising advantage of AndFound, an online platform that connects investors to a curated array of start-ups. This is why the service, launched in 2012, is so popular with users. But it's also potentially a business model weaknessthe impossible problem that sparked the contentious discussion that pushed VV and Reza out of JASON POLAN's office and onto their bikes.

VV put his helmet back on. "You're right," she said. "You can't beat a free service as long as it survives." A Hard Slap to VCs Since their days as engineering students at Stanford, Friends, VV Tikekar and Reza Rastegar had been involved in several start-ups before joining forces at AndFound. At first it was just something to do between jobs a way to give back to entrepreneurs and angelic communities, while also giving a hard slap on Silicon Valley's competitive, private, knowledge-gathering venture capital culture. Reza in particular liked the idea as he had experienced and hated the world of VC firsthand as a partner and partner at several firms. To him, it was an ugly business. VCs knew much more about finances than entrepreneurs, but they seldom offered any guidance and tended to support people they already knew. AndFound started out as a blog on topics like finding funding, choosing teams, and creating a capitalization chart. When VV and Reza started asking entrepreneurs for referrals to angel investors, they decided to create a comprehensive database of funder profiles using information gathered from the investors themselves (financing interests, past investment levels, etc.). . Soon, VV and Reza began to act as intermediaries connecting the founders with the people in their database. The next step was to hire engineers to develop technology that would allow start-ups to create online profiles such as Facebook pages and filter search results for investors for example, to look for founders who previously worked at Google or graduated from Harvard. or MIT.

Interest in the site exploded, so VV and Reza decided to start a company. They raised seed money from several angel investors and a foundation. They didn't worry about income; user growth and quality was the focus. In fact, they deliberately chose not to charge because they felt that doing so would drive the best entrepreneurs and investors away, and once they lost these high-caliber participants, everything could very well be settled. They assumed that as the site became increasingly valuable to the fledgling community, a way to monetize the business would eventually emerge. Before long, AndFound carried information on 10,000 investors and 100,000 companies, from hairdressers to tech startups. Scanning algorithms highlighted the best new entrants so they can be reviewed and featured one by one. It was a full-blown social networking hub where participants followed people and companies, commented on posts, and liked other users' updates. As a result, everyone in the startup community was using it - even VCs. However, VV and Reza weren't the only players in space. Accelerators in the Valley and elsewhere provided opportunities for entrepreneurs to coach and to offer ideas to investors. One was FundersPlatform. The company was way behind AndFound in one wayit only had a few thousand investors on its sitebut in another way it was way ahead: It had raised $10 million since its inception. AndFound had chosen not to raise a penny beyond its first round.

Never Say Never Cycling back to Mountain View, Reza shouted something over his shoulder that was lost in the wind. VV pedaled quickly, caught up and said, What? yell. "I said we would never charge our users for meeting each other!" Riza shouted from behind. VV pumped his legs harder to get in front of his partner and stayed there for the rest of the ride. Reza's categorical opposition to demanding wages was what stopped the business model discussion earlier in the day. VV knew they had to continue this discussion, but they were not going to do it on their motorcycle. She thought of her meeting last month with Hap Berger, an investor richer and better-connected than Cynthia. He flew VV and Reza to Los Angeles in his private jet, sent a car to take them to a Newport Beach marina, and put them on his boat that was so big that they knew it was to kick the VV tires and decide whether or not to invest. It sounded very informal, but it was about real money at least $10 million, maybe $25 million that VV felt the company desperately needed to hire staff, improve technology infrastructure, and sustain growth. The problem was that Hap was looking for explosive revenue growth. VV explained why he and Reza care so much about the "best" and "free" and why AndFound hasn't pursued revenue yet. Then Riza used the word "never" and that was it. Suddenly depressed, Hap said it was too late for the sunfish and returned to shore. VV understood why Reza was so adamant about not charging user fees. She also saw AndFound as a vital service to highly talented but disconnected entrepreneurs and investors suffering under a deeply corrupt funding system. But in VV's view, the site simply cannot survive longer without cash flow, let alone keeping up with its competitors. There were alternatives to charging user fees, and VV and Reza discussed these on the way home from their visit with Hap. First, there was the company's new Talent portal. Aware of how difficult it can be to find entrepreneurial talent, VV and Reza created a section on the AndFound site to connect startups with job seekers at tech centers around the country, allowing them to filter just like investors do. companies. They were currently running 2,000 promotions per week on behalf of 30,000 candidates, and they estimated the service could save a typical company $25,000 or more in per-candidate recruiting fees. The service was currently free, but it was a potential source of cash that certainly didn't conflict with AndFound's primary mission of connecting top investors with top startups. Tools and documents developed by VV and Reza to facilitate the financing process can also generate income. Many are already available for free in the form of blog posts, but maybe AndFound can install a paid subscription or subscription game to access them. The other two options will involve the investment transactions themselves. AndFound wasn't a broker the regulatory barriers were very high but as part of its mission to democratize the startup world, it partnered with one to make it easier for small investors to invest in micro VC funds rather than individual ones. start-ups. AndFound was not making any money for its services as a facilitator, but could decide to charge the broker-dealer a percentage of their fees. The other option would be to raise funds from other angels on the site to offer a product that helps experienced angel investors leverage their expertise. Instead of charging a fee for the service, AndFound may structure each such investment as a separate fund; If the investor made money by cashing out, AndFound would receive a small portion of the profit. But none of these revenue models looked like a silver bullet; Thus, as many times before, VV and Rza postponed the decision.

point of contention

By the time they got back to AndFound's office, it was so late that everyone had gone home. Physically exhausted, VV and Riza sat on chairs and looked at each other. We need to do a funding round, VV said. Riza did not answer. We need twice the staff we have now, VV continued. "And we're far beyond touching angels or foundations." Personally, I think we can manage for a long time as we are, Riza finally said. "But okay, I'm playing for a funding round." For this we need a revenue model. If our goal is to raise $10 million to $25 million with an initial valuation of $100 million to $150 million, high-quality investors will need to see exactly how we're going to reach billion-dollar valuation in a few years. So they can get the return they want. All these things we talked about - the talent portal, the tools, the shared brokerage fee, the interest carried, Reza said. Let's be serious about researching them as monetization strategies. "But will they really get us where we need to go?" she asked. They are capable of making some good money, but even in combination, they probably won't produce anything like the growth we need. "I think you're wrong there," said Riza. "We won't know until we try. But even if you're right, we'll have to find other options - something else that has third-party interest in what we're doing." "But we can't rely on the lanes of our offerings and our community. We need a revenue stream from our core business and strength: connecting good startups with good funders." "Okay, so let's put off the funding round," Riza said, disappointed. "Six months is a century in our business. Then our traffic could increase by 200%, which could greatly increase the potential value of all the revenue streams we're talking about. "I've said this before, but I'll say it again: If we stick to a model now, we risk undermining our business." Now VV is frustrated. "Six months? We can barely handle everything we need to do anyway." Improving algorithms, maintaining site infrastructure, continuing to review all start-ups and choose what they have to offer to investors - the list went on. We're going to lose our business as the site goes down, VV continued. "FundersPlatform may not seem like much of a competitor right now, but wait until they start pumping new capital into their operations - while we weaken." We will never lose our job because we are the best thing to happen to the startup community, Reza said. "And we are free." Reza had combined the three words ("never", "best" and "free") into one sentence that came to describe AndFound's impossible situation. But VV was even more succinct in his angry response: "Freedom is never the best," he said. "Not in the long run. You'll see: 'Free' will turn us into the best startup that never reached maturity."

Answer the question about case study

Please develop a business model (Barringer/Ireland Business Model ) analysis for AndFound based on the information provided in the case ? AND discuss whether they should stick to their current freemium model or change it and start charging customers ?