In search of a working business model

IMG_20170331_101053.jpgWe were prepared to close down and give back the remaining funds to our investors, revealed Aage Reerslev CEO at Wrapp when we met him at the Wrapp HQ yesterday. Wrapp, founded in 2011, was initially one of the most hyped startups. The team was very experience and had already the first year investors like Creandum, Atomico (Niklas Zennström), Greylock Partners (Reid Hoffman), and American Express. Expectations were extremely high, the service was launched and did initially perform quite well. But after some time it became clear that the business model did not work. The company, stressed by high expectations and aggressive competition by copy cats, had fallen into the trap of premature scaling. The very tough decision to close down the initially launched service and pivot was taken. International operations were closed down and the team in Stockholm developed a new version of the service based on the experience gained. Going from a hyped startup with all the right names in the team and board, to a company closing down the service, most expected that the Wrapp story had come to an end. But that was not the case, the new version of the service was launched spring 2015 with very strong partners and this time it looks like they got it right. The service now creates significant value for all involved parties (retailer, banks, end users as well as for Wrapp) and the expansion and scale up seems now to be more strategic and controlled. We are happy that we had the opportunity to visit Aage Reerslev and Wrapp and wish them a bright future.

Advertisements

4 responses to “In search of a working business model

  1. It has become more common for people to use refund websites or applications when shopping. Wrapp is one of these services, but instead of using a website it is connected to your credit card. You will refund on purchases or discount offers (ex refunder https://www.refunder.se/). I believe that this is the new way for companies to advertise. Instead of making expensive ad-campaigns, they give back some money to their customers so that they more likely will choose your shop again. The Wrapp app is a good way for the customers to keep track of their offers from different retailers.
    Wrapp had several inverstors such as Creandum who also has invested in Linas Matkasse and Tictail (https://www.creandum.com/portfolio/), Atomico who focuses on bussiness in Europe (http://www.atomico.com/manifesto), Greylock Partners and American Express. As Wrapp had so many early investors the expectations were raised and I believe this could be one of the reasons they were exposed to premature scaling. Premature scaling can occur due to a lot of things, but the overall meaning is that the company is growing too fast. One reason could be that the company are hiring too many people to match the demand or they might not even be open. In the Wrapp case they shut down and pushed the launch forward as the business model did not function.
    I believe that it is easy to get overexcited, especially if you have a lot of investors that have high expectations. The pressure to launch a perfect product early might increase the risk of failing instead. But in the Wrapp case I think they did the right thing to shut down and regroup instead of having to shut down for good. I think it is important to be careful even though you have sufficient funds to eliminate the risks of premature scaling.

    Liked by 1 person

  2. Lean Canvas vs Business model canvas

    There are several different reasons why some versions of Alexander Osterwalder’s Business Model Canvas are more applicable in certain cases than others. Ash Maurya, the creator of the Lean Canvas, was finding the original BMC to be too simplistic and often based on companies that had already become large and successful. He was more interested in the learning that got them there. After he had developed the Lean Canvas, he tested his canvas in several different startups and was encouraged by its ability to enable more learning instead of pitching conversations. By focusing on the actual problem at hand (for the entrepreneur) instead of some derivate like value proposition; he discovered that it became much more efficient in reaching viable and good solutions. One important aspect for the Lean Canvas is that it is meant for entrepreneurs in particular, not investors or consultants.

    Liked by 1 person

  3. During our lecture with Andy Cars from Lean Startups, Andy presented an alternative framework for business modelling: The Lean Canvas. The framework was first introduced by Ash Maurya. Ash criticised the Business Model Canvas, arguing that its layout isn’t optimal for companies that are in a start-up face, but rather suits analysis of already established companies. Ash for example states that the canvas for startups should include a clear definition of the problem that the startups is solving. The reason why this is so important is because one of the main reasons to why startups fail is because they haven’t correctly identified the problem. In addition to adding the box ”Problem”, Ash also added ”Key metrics”. The purpose of the box is to ensure that the right goal is being chased. Lastly, Ash added Unfair Advantage (similar to competitive advantage). The rational for adding this box was that startups have to be conscious about the fact that they most likely will be copied and have to be ready to compete. The boxes that were removed from the Business Model Canvas were Key Activities and Resources, Customer Relationships and Key Partners. The rational for removing these boxes were either that the important aspects that these boxes bring already are covered in other boxes (eg Customer Relationship is very similar to channel) or because they are not applicable for all types of companies (eg Partnerships are often not that important). (https://www.linkedin.com/pulse/why-lean-canvas-vs-business-model-ash-maurya)

    With its new boxes and the increased focus on the uncertainties that startups face, I believe that the Lean Canvas is a better framework for startups and that the classic Business Model Canvas rather suits traditional companies better.

    Liked by 1 person

  4. The business model canvas is a tool to use when you are just forming your business. Instead of writing long business plans that no one ever reads you can instead use the business model canvas. As it includes many of the important pillars in a new firm, but it is easy to change and rewrite, it is a good tool. It is easy to change and you get a good overview of the certainties and risks with the new company you are forming. Then we have the Lean Canvas that focuses more on the problem and solution. I believe this is very important for a new business, especially if you are targeting a new segment of business. It is very important that your business idea solves a “real” problem, not a fabricated problem, which really not is a problem. Andy Cars have created his own canvas where he combines the two earlier described. He believes that this creates the most value when starting to create your own business. I am prepared to agree, as I believe that using the two canvases separately is not information enough as some key elements are left out.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s