Business plan obfuscation: Twitter style

Charles Hudson says it: “why the ‘you don’t need a business plan’ meme is crazy talk.

Where did that come from? Well, there’s this little theory that was reported on a bunch of blogs that Twitter and other companies don’t have business plans.

That’s bulls**t.

But here’s why the story gets told: Twitter doesn’t want to talk about its business plan in public. If they told you what they are doing, how they are planning on making revenues and spending their money they’d be handing their competitors a MAJOR advantage.

Twitter is brilliant, though, because they told a believable story instead of just saying “we’re not showing you our business plan.” When I was there Friday interviewing Twitter’s execs I asked about the business plan. Biz Stone told me they were doing research. He told a great story! We’ll have that video up shortly so you can hear exactly how they are positioning the company.

I wish I was smart like those Twitter folks.

The thing is I’ve met a couple of VCs who were considering investing in Twitter. The word on the street is that Twitter HAS a business plan and has done a lot of thought about where future revenues will come from. THAT is why they got invested in.

They just aren’t going to show it to us. And they shouldn’t.

Oh, and if you REALLY think you can get funded without having a business plan you’re probably smoking something illegal. Can I come along and film you trying to pitch a VC if you think you can do that?

81 thoughts on “Business plan obfuscation: Twitter style

  1. They had all sorts of things: Buy It Now, Feedback System, etc.

    Killer Apps can be less than tangible–in Ebay’s case it was CREDIBILITY. TRUST. SAFETY. You can’t steal that, at least not quickly.

    What was YouTubes? Free hosted, no-plugin required video. Facebook? College student tailored. Myspace? Place for bands, hosted music, customizable profiles and UNRESTRICTED ACCESS.

    That’s the point: Buzz is not a foundation to build a business on, especially with how fickle you people are. All Twitter has is buzz: no new technology, no massive market share, no loyal users, no killer app.

  2. Hey Robert

    As the surprised originator of the “You don’t need a business plan” meme, I sort of feel like I should insert myself in here on this Twitter biz plan thing.

    My point wasn’t that business plans are a complete waste. That’s silly. I was making two other points. First, you can get away with having a considerably less crisp plan if you have something else to put on the table with VCs, like boffo traffic/growth numbers. Second, in dealing with VCs keep in mind that they are professional nitpickers, so treat initial discussions with them as a dance of many information veils.

    I now return folks to their regularly scheduled Scoble-ing.

  3. Hey Robert

    As the surprised originator of the “You don’t need a business plan” meme, I sort of feel like I should insert myself in here on this Twitter biz plan thing.

    My point wasn’t that business plans are a complete waste. That’s silly. I was making two other points. First, you can get away with having a considerably less crisp plan if you have something else to put on the table with VCs, like boffo traffic/growth numbers. Second, in dealing with VCs keep in mind that they are professional nitpickers, so treat initial discussions with them as a dance of many information veils.

    I now return folks to their regularly scheduled Scoble-ing.

  4. Ryan: you sound like the same people who said that eBay didn’t have lockin. It certainly did. I’m not leaving a service that my friends are still on. Now, if all my friends move over, then that’s one thing.

    Leo Laporte left Twitter and went to Jaiku which does pretty much the same. But very few other people left. Why not? I guess your theory is that they are all idiots, right?

  5. Ryan: you sound like the same people who said that eBay didn’t have lockin. It certainly did. I’m not leaving a service that my friends are still on. Now, if all my friends move over, then that’s one thing.

    Leo Laporte left Twitter and went to Jaiku which does pretty much the same. But very few other people left. Why not? I guess your theory is that they are all idiots, right?

  6. Robert:

    You simply do not understand markets or incentives. Multiple people here have raised the same point. Twitter has nothing that protects it from competition–that prevents others from simply emulating their methodology. Just like you don’t understand the iPhone. Neither are “disruptive” technology. They simply move the market forward with innovations but they control nothing. The iPhone doesn’t really bring anything to the table that prevents Samsung from making a better cheaper phone to steal the bottom out from Apple. (They could have had one, many people think, had they created a phone that wasn’t tied to a single network. THAT would have been unique, instead of simple innovative.) Twitter is the same way–what do they bring to the table that someone can’t copy? They are simply a concept, not a business. If it’s successful, FB will steal it, if it’s not Twitter goes away. All risk, no upside.

    Of course they have a user base–but not a sustainable one in the light of HOW FREE MARKETS WORK. It’s ok, you don’t understand these things. Many don’t. But if you’re looking for a reason to why many, many of your predictions fail, this is it.

  7. Robert:

    You simply do not understand markets or incentives. Multiple people here have raised the same point. Twitter has nothing that protects it from competition–that prevents others from simply emulating their methodology. Just like you don’t understand the iPhone. Neither are “disruptive” technology. They simply move the market forward with innovations but they control nothing. The iPhone doesn’t really bring anything to the table that prevents Samsung from making a better cheaper phone to steal the bottom out from Apple. (They could have had one, many people think, had they created a phone that wasn’t tied to a single network. THAT would have been unique, instead of simple innovative.) Twitter is the same way–what do they bring to the table that someone can’t copy? They are simply a concept, not a business. If it’s successful, FB will steal it, if it’s not Twitter goes away. All risk, no upside.

    Of course they have a user base–but not a sustainable one in the light of HOW FREE MARKETS WORK. It’s ok, you don’t understand these things. Many don’t. But if you’re looking for a reason to why many, many of your predictions fail, this is it.

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  9. I still don’t get Twitter. I tried it, had friends on it, stopped using it (as did most of my friends) and don’t miss it a bit.

    And — at risk of re-upping the Facebook hype — can someone, anyone explain to me what’s to keep Facebook from emulating twitter 100%? It seems the following steps would suffice:

    1) Letting you “follow” someone or be a “fan” of them without requesting reciprocation.
    2) Er… I think that’s about it. Let’s see, Facebook member updates his status, it goes to whomever he’s permissioned.

    Mobile access? Already there. IM access? Couldn’t be that hard to add.

    Er, any other barriers to entry that I’m missing?

  10. I still don’t get Twitter. I tried it, had friends on it, stopped using it (as did most of my friends) and don’t miss it a bit.

    And — at risk of re-upping the Facebook hype — can someone, anyone explain to me what’s to keep Facebook from emulating twitter 100%? It seems the following steps would suffice:

    1) Letting you “follow” someone or be a “fan” of them without requesting reciprocation.
    2) Er… I think that’s about it. Let’s see, Facebook member updates his status, it goes to whomever he’s permissioned.

    Mobile access? Already there. IM access? Couldn’t be that hard to add.

    Er, any other barriers to entry that I’m missing?

  11. Are they ever going to fix the AIM interface?

    Why doesn’t Twitter answer support emails? Ever.

    Sending me spam email about funding when your major interfaces are broken show a major breakdown in priorities. Will they fix this stuff or will every Twitter user migrate to Facebook?

  12. Are they ever going to fix the AIM interface?

    Why doesn’t Twitter answer support emails? Ever.

    Sending me spam email about funding when your major interfaces are broken show a major breakdown in priorities. Will they fix this stuff or will every Twitter user migrate to Facebook?

  13. Tons of people in my circle wanted me to join Facebook before the app platform. It’s just that’s when the dam broke.

    Twitter has no killer app? Interesting. Yet thousands of people are using it every evening.

    No one holding me accountable? Seems like you just did.

  14. Tons of people in my circle wanted me to join Facebook before the app platform. It’s just that’s when the dam broke.

    Twitter has no killer app? Interesting. Yet thousands of people are using it every evening.

    No one holding me accountable? Seems like you just did.

  15. DUDE. Facebook is the epitome of your bubble. These features have been around for less than 2 months. 2 months! Almost no conclusions ought to be made around their usage and viability yet.

    Data we can use:
    -College students went to Fb in droves to get away from the shit on Myspace.
    -FB was wildly popular before the apps.
    -Geeks gave it almost no attention before they added geek stuff to it.
    -You thought Second Life was going to be the Next Big Thing.

    Twitter has no killer app. The concept might have legs (microblogging) but why would teenagers–the rest of the world go to that service when it is very easily integrated into existing service?

    You will be wrong here, as usual and no one will hold you accountable. Unsubscribed. Tired of your shit.

  16. DUDE. Facebook is the epitome of your bubble. These features have been around for less than 2 months. 2 months! Almost no conclusions ought to be made around their usage and viability yet.

    Data we can use:
    -College students went to Fb in droves to get away from the shit on Myspace.
    -FB was wildly popular before the apps.
    -Geeks gave it almost no attention before they added geek stuff to it.
    -You thought Second Life was going to be the Next Big Thing.

    Twitter has no killer app. The concept might have legs (microblogging) but why would teenagers–the rest of the world go to that service when it is very easily integrated into existing service?

    You will be wrong here, as usual and no one will hold you accountable. Unsubscribed. Tired of your shit.

  17. LayZ: and I know lots of teenagers who think you are lame. So, what does that all mean? Facebook already has something very similar to Twitter built in and most of the teenagers I’m watching use that built-in feature.

  18. LayZ: and I know lots of teenagers who think you are lame. So, what does that all mean? Facebook already has something very similar to Twitter built in and most of the teenagers I’m watching use that built-in feature.

  19. If you’re asking for other people’s money, you have to be able to communicate your idea, but I’m sure different funders have different wants, so what may work for one may not work for another.

  20. If you’re asking for other people’s money, you have to be able to communicate your idea, but I’m sure different funders have different wants, so what may work for one may not work for another.

  21. …i’m 22, for what it’s worth.

    nerds find twitter interesting, just like nerds found computers interesting back in the 70′s and 80′s. only nerds would have a computer in their home, right?

    wrong.

  22. …i’m 22, for what it’s worth.

    nerds find twitter interesting, just like nerds found computers interesting back in the 70′s and 80′s. only nerds would have a computer in their home, right?

    wrong.

  23. @9 Amen to what Ryan @9 said. Scoble, you live in such a bubble it’s almost laughable. My kid, 22 years old, just finishing college. Does the Facebook, Myspace, IM, chat, etc thing. Friends do it too. Many do the WoW thing, etc. So, they are pretty “normal” for that age group. Few if any of their friends have heard of Twitter. And the ones that have find it “retarded”. Yeah, it’s an anecdotal example, but likely not that uncommon in the real world.

  24. @9 Amen to what Ryan @9 said. Scoble, you live in such a bubble it’s almost laughable. My kid, 22 years old, just finishing college. Does the Facebook, Myspace, IM, chat, etc thing. Friends do it too. Many do the WoW thing, etc. So, they are pretty “normal” for that age group. Few if any of their friends have heard of Twitter. And the ones that have find it “retarded”. Yeah, it’s an anecdotal example, but likely not that uncommon in the real world.

  25. If I recall, Fred said they like to see something like 20,000 end-users in the consumer market before thinking about an investment. Here’s the link, I believe: http://www.unionsquareventures.com/2006/09/traction.html

    Now… if there’s growth, you know that the marketing “plan” is working (even if it’s an informal or unwritten plan). With that said, there might not even be a revenue plan right now… which is why seed-stage and early-stage VC funding is a calculated gamble. You lose most of the time, but when you win… it often makes up for the losses.

    I have no doubt that Twitter hasn’t thought much about a revenue plan – they’ve been too busy scaling their explosive growth. That’s a problem most startups would like to have, or at least I would bet money on it.

  26. If I recall, Fred said they like to see something like 20,000 end-users in the consumer market before thinking about an investment. Here’s the link, I believe: http://www.unionsquareventures.com/2006/09/traction.html

    Now… if there’s growth, you know that the marketing “plan” is working (even if it’s an informal or unwritten plan). With that said, there might not even be a revenue plan right now… which is why seed-stage and early-stage VC funding is a calculated gamble. You lose most of the time, but when you win… it often makes up for the losses.

    I have no doubt that Twitter hasn’t thought much about a revenue plan – they’ve been too busy scaling their explosive growth. That’s a problem most startups would like to have, or at least I would bet money on it.

  27. Fred Wilson wrote:
    ***As we stated when we made our investment in Delicious,

    The question everyone asks is “What is the business model?” To be completely and totally honest, we don’t yet know.

    The capital we are investing will go to making Twitter a better, more reliable and robust service. That’s what the focus needs to be right now. We’ll have plenty of time to figure out the business model and there are many options to choose from.***

    So if what you are saying is correct, Robert, Fred Wilson is either lying or “business plan” no longer means what I was taught ten years ago in graduate business school.

  28. Fred Wilson wrote:
    ***As we stated when we made our investment in Delicious,

    The question everyone asks is “What is the business model?” To be completely and totally honest, we don’t yet know.

    The capital we are investing will go to making Twitter a better, more reliable and robust service. That’s what the focus needs to be right now. We’ll have plenty of time to figure out the business model and there are many options to choose from.***

    So if what you are saying is correct, Robert, Fred Wilson is either lying or “business plan” no longer means what I was taught ten years ago in graduate business school.

  29. Business Plan is like a Travel Plan. You can travel without a travel plan and objective. Without a good travel plan you can easily get lost, lose your budget, end up not making to your desirable destinations, end up not reaching your destinations in time.

    Ask any boy scout or girl scout. If you travel without a travel plan, you are likely to miss the target in time within budget.

    Running a business without a business plan is like traveling with Paris Hilton. If you have millions to spend without a plan, it is a hobby not a business.

    Even our little web group has a business plan with marketing strategy.

  30. Business Plan is like a Travel Plan. You can travel without a travel plan and objective. Without a good travel plan you can easily get lost, lose your budget, end up not making to your desirable destinations, end up not reaching your destinations in time.

    Ask any boy scout or girl scout. If you travel without a travel plan, you are likely to miss the target in time within budget.

    Running a business without a business plan is like traveling with Paris Hilton. If you have millions to spend without a plan, it is a hobby not a business.

    Even our little web group has a business plan with marketing strategy.

  31. Yeah Twitter is brilliant. Or they could be totally stupid and this might NEVER catch on. Frankly, you don’t have a clue and like always you are confusing what YOU like with what the rest of the world likes.

    How about we give talking about Twitter a break and talk about it again when it starts to find resonance with people outside the tech/hipster crowd? Until then it’s not scalable and whatever BP they have will fail.

  32. Yeah Twitter is brilliant. Or they could be totally stupid and this might NEVER catch on. Frankly, you don’t have a clue and like always you are confusing what YOU like with what the rest of the world likes.

    How about we give talking about Twitter a break and talk about it again when it starts to find resonance with people outside the tech/hipster crowd? Until then it’s not scalable and whatever BP they have will fail.

  33. I’d pay $100 easy to go back to the BDC risk cap and say
    “how’s that turning out for you now, YOU IDIOT”
    It would set me free in so many ways.

  34. I’d pay $100 easy to go back to the BDC risk cap and say
    “how’s that turning out for you now, YOU IDIOT”
    It would set me free in so many ways.

  35. The BDC turned down our plan for a Linux GUI toolkit and distro because they thought it was too optmistic. Then they invested in a company that simply repackaged Debian and changed the name instead.

    I think development bank of Canada and some of the north eastern VC that once in a great while have tech ventures to clear out and pretend they are in Cali for a sec, should buy themselves a dart board and save themselves the trouble of thought. It wouldn’t change anything.

  36. The BDC turned down our plan for a Linux GUI toolkit and distro because they thought it was too optmistic. Then they invested in a company that simply repackaged Debian and changed the name instead.

    I think development bank of Canada and some of the north eastern VC that once in a great while have tech ventures to clear out and pretend they are in Cali for a sec, should buy themselves a dart board and save themselves the trouble of thought. It wouldn’t change anything.

  37. Business plans are for traditional business. There is no way to forcast on web ventures at all unless it’s very well established.

    Had youtube accurately forcasted, plotted and charted their revenue in a business plan in August of 2005, the investors would have thought they were on crack cocaine.

  38. Business plans are for traditional business. There is no way to forcast on web ventures at all unless it’s very well established.

    Had youtube accurately forcasted, plotted and charted their revenue in a business plan in August of 2005, the investors would have thought they were on crack cocaine.

  39. To Copy what I said in Charlie’s Blog:

    For over 10 years I’ve owned a computer consulting company, most of the time I’ve been the only employee, never needed to raise any capitol. The company exists mostly to provide liability protection and tax benefits.

    As times have changed the company has moved from home tech support, to some subscription software development to, now, contract programming. Over the years I’ve always had a business plan. As projects can get “scope creep” businesses can get “business creep” and you can wind up doing things outside your business’s goals. My plan might not be as detailed as a traditional plan, but it spells out my business’s goals for the next 3-6 months, and I revisit it every quarter.

  40. To Copy what I said in Charlie’s Blog:

    For over 10 years I’ve owned a computer consulting company, most of the time I’ve been the only employee, never needed to raise any capitol. The company exists mostly to provide liability protection and tax benefits.

    As times have changed the company has moved from home tech support, to some subscription software development to, now, contract programming. Over the years I’ve always had a business plan. As projects can get “scope creep” businesses can get “business creep” and you can wind up doing things outside your business’s goals. My plan might not be as detailed as a traditional plan, but it spells out my business’s goals for the next 3-6 months, and I revisit it every quarter.

  41. Well, you can pitch a VC whatever you like. Once at a VC breakfast from SVASE last year I heard a guy with no BP whatsoever, who was asking for $3M so he could advertise his web site on TV. I’m not kidding. You should see everyone else’s faces.

  42. Well, you can pitch a VC whatever you like. Once at a VC breakfast from SVASE last year I heard a guy with no BP whatsoever, who was asking for $3M so he could advertise his web site on TV. I’m not kidding. You should see everyone else’s faces.

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