Twitter Wisdom: Don't Bother Writing a Business Plan

Henry Blodget | July 27, 2007 7:06 AM

Trashcan Paul Kedrosky picks up on a theme that is becoming better understood of late: business plans are for losers.  In an industry changing this fast, with a dozen new entrants a day, the time it takes to research, write, and edit a 40-page business plan is better spent experimenting with a new service or checking out the competition. 

Digital businesses are so cheap to start these days that you don't need to win over boardrooms full of stuffy old bankers to fund them (and you won't, anyway).  The Twitter guys never wrote a business plan.  Alley mogul (and SAI chairman) Kevin Ryan and his partner Dwight Merriman (director) don't write business plans.  Alley emeritus Jason Calacanis, we presume, would howl at the mere thought of writing a business plan.  By the time you got to the end of it, he would point out, your business would have already changed.

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9 Comments

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Mike said:
When firms like USV say "We don't care about the business model, we care about traffic," the presumption is that traffic can be monetized. I'm reminded of the race for "eyeballs" that led to a lot of misguided decisions made in the late 1990s. The heavily trod path of ad sales will only work for some businesses. The 140 character limit of SMS text messages (on GSM), complicates Twitters ability to capitalize on ad sales.

Assuredly, it is cheaper to build and launch web-based businesses today but, at some point (sooner rather than later), entrepreneurs need to deliberate on their strategy rather than waiting for one to evolve.

Even at the seed stage, entrepreneurs should be asking themselves the tough questions about how to create a sustainable business, regardless of whether the VCs do so as well. Committing a plan to paper may be unnecessary but having a "plan" should be a prerequisite to raising outside capital. The corollary, which Kedrosky disagrees with, is to be profitable from the beginning.
Henry Blodget said:
No question they get a huge benefit from having done it before. (Although I seriously doubt Jason had crafted a thick plan when he started delivering the Xeroxed first issue of Silicon Alley Reporter a decade ago).

The message is more that, for most digital media businesses, you can at least create a prototype with very little money. And it's much easier to get funding, explain the business, etc., once you can demo an actual, live product and show actual user adoption rates.

And with many VC firms--see USV--saying publicly "We don't care about the business model, we care about traffic," the prototype is what will win the day. Then there is the ability to remain flexible, change course fast, etc.

At some point, there will obviously be a plan, but at the seed stage, the elevator pitch is what will get the job done.
Mike said:
How much of a pass do people like Ev Williams and Jason Calcanis get because they've successfully built and sold businesses before?

I'm just leary of first-time entrepreneurs with no track-record taking the "no business plan needed" advice literally.

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