Wanton Wantrepreneur: 6 business models you should be using right now

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An unbelievable number of founders come to pitch me on their companies with no idea what their business model should look like. It is never ok to put off figuring out your business model when there are so many great ones available to you. Here are a few of my favorites.

Pyramid scheme

Because most startups never figure out how to provide a product that meets any kind of market need, why not use a business model that doesn’t require any kind of product at all? Better yet, the only work you have to do is recruit people who recruit more people. Of course, pyramid schemes are eventually unsustainable, but so are most startups that get acquired. Know when to get out.

Shell company

This is what most startups are anyways, so it strikes me as odd that more of them don’t just adopt this business model from the start. A shell company is usually a company with only cash assets and no real operational purpose other than to hold and spend that money, much like Color.com. So get your investment capital, start paying yourself a salary, and wait for the cash to run out.

Tax haven

In the rare case that you know someone making an actual profit, chances are they are in a country with high corporate income taxes. While you are busy trying to get ahold of your first yacht, why not bring in a little bit of income operating as a tax haven? It’s extremely simple. Your profitable colleagues funnel all of their corporate transactions through your business, which happens to be incorporated in some Caribbean country with no corporate taxes. They get to keep more of their money, and you don’t have far to walk to look at yachts.

Ponzi scheme

Ponzi schemes get all kinds of unfair bad press, but nobody ever talks about the success stories like Groupon. As long as you have something going that looks like it could be big, just keep raising money and buying back your own stock with it.

Multi-level marketing

To be a proper MLM company, you really have to have a product that people could sell, but that they won’t actually be able to sell. So make some shitty software, sign up a few customers, and then come back and offer to pay them some percentage of future earnings if they can get more customers for  you. Make sure to promise that they will get rich easily. I mean, how hard do they think this will be? This stuff sells itself.

 

 

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The Wanton Wantrepreneur: The foolproof way to calculate your company value

Licensed from 401K on Flickr.

If you are like me, you have put up a LaunchRock page and updated your LinkedIn profile to reflect your new status as CEO. You have a team of crack developers that you recruited away from the Geek Squad at Best Buy. You copied a business model off of DocStoc and put your name on it. It’s time to raise money, but how much is your company worth?

Founders

It has been said that investors invest in the team, not the idea. This is total bullshit. Investors like people that are young and stupid, which explains why they love college dropouts. How much money did Facebook raise anyways? Like a trillion dollars.

Add $100k if you are 27 to 29

Add $200k if you are 22 to 26

Add $400k if you are 19 to 21

Add $100k if you dropped out of college

Team

Your founding team needs to be big so you can prove that you can recruit. The internet is filled with VC’s telling you to always be recruiting, and if you have 4 or 5 cofounders, then everyone knows you can close, and that is worth lots of money.

Subtract $500k if you are a solo founder

Add $50k if you have 2 cofounders with you

Add $100k if you have 3 cofounders with you

Add $500k if you have 4 or more cofounders with you

Customers

This is the worst thing for your business. Customers always feel like you owe them something, mostly because they gave you money, and then they try to tell you what to do. Worst yet, once someone pays you, then you have to tell investors how little the customer gave you. If nobody has given you any money yet, then you are ahead of the game.

Subtract $1k for every paying customer

Skills

Everyone working at a startup has to be good at something. And what is the best way to tell if someone has skills? Where they worked before.

Add $50k for each ex-Google employee

Add $100k for each ex-Apple employee

Add $500k for each Facebook employee

You are probably wondering why Facebook employees are worth so much to the value of your company. Investors only hate one thing worse than losing money, and that is looking stupid. The more Facebook employees you have, the more likely you are to get some newly minted millionaire idiot to invest in your company when it implodes.

Miscellaneous

There is plenty of other stuff that can impact your valuation.

Add $100k if your developers use Apple products

Subtract $100k if you know what Windows Azure is

Add $1m for: The Instagram of X

Add $100k for every five thousand Twitter followers you have

At the end of the day, just remember that entrepreneurship is not about creating value, it’s about raising money and buying a yacht. Follow my guide to valuing your company and you will be on the ocean in no time.

Facebook IPO uncovered as a Ponzi scheme by SEC [BREAKING]

In 2004, Eduardo Saverin registered a business in Massechusets. The company was registered as “The Facebook Inc.” This is a story that we’re all familiar with: a Harvard sophomore Mark Zuckerberg built a website that has taken the world by storm. This is the story that was told to Savern’s investors. He said that Facebook was changing the world. He said that it was used by the hundreds of millions. There’s just one problem. Zuckerberg and the website never existed. Today, the Securities and Exchange Commision has released documents after an investigation detailing a long running Ponzi scheme that ends with valueless stock being sold to the general public.

At first the scheme was easy. The Facebook was an exclusive site. He told his investors that only Harvard students could use the site, and that’s why the investors couldn’t see it. In order to raise more money, Saverin had to convince investors that the site was growing. He continued the story, acting like it was open to other colleges, and then high schools. This ploy got him further, but at some point, in order to keep the investment money flowing, he had to open the fake site to the public.

This is where the scheme got much more complicated for Saverin. Once open to the public, his investors wanted to join the site that didn’t exist. Saverin hired a team of developers in India to put together a basic functioning website. He then used Mechanical Turk to create tons of fake users in the database. This was just enough to convince the investors that The Facebook was legit. Some questioned why they couldn’t see any information from the claimed millions of other users. He told them that they could only see content and profile information from their “friends”. This was the start of social media as we know it.

The developers had left the website open to the public and a few people started signing up for the website. Worried that people might find out that the website was only a sham, he started hiring cheap foreign labor to play the part of the new users’ friends. They would spy on the friends of the users that were joining and create fake profiles and content for those people. Even today, Facebook only has about 2,000 users, and their friends’ activity is being written by non-english speaking people, which explains all the bad grammar and misspellings.

Eduardo Saverin fled the United States years ago and continued to run this scheme. He just renounced his citizenship and his whereabouts are unknown, but the FBI would like to know any information you may have. With the release of the SEC’s investigation, Facebook’s stock is expected to plummet, as Facebook has no real assets. Mockcrunch has placed a target price of $0.01 and a SELL rating on FB.

Zuckerberg cancels Facebook IPO: “No hoodie, no IPOie” [BREAKING]

One week from now, Facebook was expected to launch their highly anticipated IPO, allowing employees, shareholders and the general public the ability profit off of the dominating social network. Everything seemed to be lined up and ready to go. Facebook even prepared a roadshow to entice investors. Well, that was until an analyst was interviewed on Bloomberg TV, making remarks that caused a very unexpected result: the end of Facebook’s IPO.

Michael Pachter, an analyst for Wedbush Securities and one of the first analysts to give Facebook a “buy” rating, was questioned on why he believed Mark Zuckerberg was a risk for Facebook. His reply caused a stir. “Mark and his signature hoodie: He’s actually showing investors he doesn’t care that much; he’s going to be him; he’s going to do what he’s always done. I think that’s a mark of immaturity.” Shortly after this interview, Mark got wind of it, and he wasn’t happy.

Today, Zuckerberg himself released the following statement.

Michael thinks he’s soooo smart. “I wear a suit so I’m mature”. You know what Michael? I built a f*cking social network in this hoodie that most of the PLANET uses! Facebook has more users than you’ve had minutes alive, which I assume is a hell of a lot since you’re like 120 years old, you old butt munch. What have you done with your life? Trade stocks? In a suit? Sounds dumb. And really uncomfortable. You should wear a hoodie sometime. And take that stick out of your ass while you’re at it. Oh yeah, one more thing. You want immaturity? How’s this. No hoodie, no IPOie. Yep, I’m canceling the IPO. Sucks to be you.

As if this statement and decision wasn’t shocking enough, it is said that Zuckerberg made it irrationally and entirely on his own. He didn’t consult with a board member or fellow executive, similar to when he made the decision to acquire Instagram for $1 billion. This is classic Zuckerberg and clearly justifies Michael’s concerns. We’ll watch as this story continues to develop.