Before product-market fit. Before branding. Even before fundraising, every great startup begins with a clear answer to one fundamental question:
How will this business make money and from whom?
That’s what a business model answers. It’s the foundation for everything that follows: your product strategy, pricing, team structure, and even funding approach.
Let’s break it down.
What is a Business Model?
A business model is the blueprint for how a company creates, delivers, and captures value. It defines:
- Who your customers are
- What value you offer them
- How you deliver that value
- And how your business earns revenue and profit from it
In short: It’s how your business works — end to end.
Why Business Models Matter for Startups
You don’t need a 40-page business plan, but you do need a clear business model.
Here’s why it matters:
- Clarity: A solid business model helps founders and teams stay aligned on who they’re serving and how they’ll make money.
- Decision-Making: It influences your pricing, marketing, operations, and funding strategy.
- Investor Confidence: VCs and angels care less about just the idea and more about whether the business model can scale.
- Risk Reduction: It forces you to validate assumptions early about what customers will actually pay for, and at what scale.
Common Types of Business Models (with Examples)
There’s no one-size-fits-all model, but here are some proven business models across industries:
| Model | How It Works | Examples |
|---|---|---|
| Direct-to-Consumer (D2C) | Sell directly to customers via own channels | Boat, Mamaearth, Warby Parker |
| SaaS (Software-as-a-Service) | Charge subscription for cloud-based software | Freshworks, Zoho, Salesforce |
| Marketplace | Connect buyers and sellers, earn via commissions | Zomato, UrbanCompany, Airbnb |
| Aggregator | Bring similar service providers under one brand | Ola, Practo, Policybazaar |
| Franchise | Let others use your brand and process for a fee | McDonald’s, FirstCry |
| Razor & Blade | Sell core product cheap, make money on repeat use | Gillette, Printer + Ink models |
| Licensing | Charge for use of intellectual property | Dolby, Disney IP, tech patents |
The most resilient startups don’t just invent new models, they remix proven ones with pricing and acquisition strategies that match their customers and market timing.
Choosing the Right Business Model: Key Questions for Founders
- Who are your primary customers?
B2B vs B2C models are often very different. - How will you deliver your product or service?
Online? Through partners? Using physical inventory? - What is the pricing power or recurring potential?
Subscription? One-time sale? Usage-based? - What’s your path to profitability?
Can you scale without a huge burn rate? - How do others in your space make money and what could you do differently?
Business Model Pivots: When the Model Needs to Evolve
Sometimes, the original business model doesn’t scale or doesn’t match how users actually behave. That’s when startups undergo a business model pivot: changing how they deliver value or how they make money, while keeping the core user problem in focus.
These pivots often mark turning points in a company’s journey and are not signs of failure, but of adaptability.
Real-World Examples of Business Model Pivots
Slack
Started as a gaming company → pivoted to workplace messaging SaaS with a freemium model
Outcome: Built one of the most successful SaaS businesses, acquired by Salesforce for $27B
Nykaa
Started as a content-led beauty e-commerce platform → evolved into a hybrid of D2C brand, exclusive brand retail, and owned offline stores
Outcome: Listed on Indian stock exchanges and built a strong omni-channel brand
Netflix
Started with DVD rentals by mail → became a subscription-based streaming platform
Outcome: Disrupted Hollywood and built a global content business
These pivots weren’t just product changes, they were business model reinventions
Business Model ≠ Revenue Model (But They’re Related)
- Business Model = The entire system: product, delivery, customer, revenue
- Revenue Model = How you charge and earn money (subscription, ads, commission, etc.)
Think of your revenue model as a subset of your business model. Business Model is broader and includes customer experience, cost structure, and value delivery.
Final Thought
Ideas are plenty. Products are everywhere. But what separates viable startups from the rest is a clear, scalable, and tested business model.
It’s all about how your business makes sense.
Before you build, ask: Will this model work sustainably?