Business Model Fundamentals
A business model describes how your company creates, delivers, and captures value. It's not just how you make money—it's the entire logic of how your business works.
Business Model Basics
What is a business model?
Common Business Model Types
💳 Subscription
Recurring payments for ongoing access
Netflix, Spotify, SaaS
🆓 Freemium
Free basic tier, paid premium features
Dropbox, Slack, Canva
🤝 Marketplace
Connect buyers and sellers, take a cut
Airbnb, Uber, Etsy
📦 Direct Sales
Sell products directly to customers
Apple, Warby Parker
📢 Advertising
Free product, sell user attention
Google, Facebook, TikTok
🔄 Transaction Fee
Take % of each transaction
Stripe, PayPal, Square
Revenue Streams
How will you actually make money? Consider:
- One-time payments: Single purchase (products, courses)
- Recurring revenue: Monthly/annual subscriptions
- Usage-based: Pay per use (API calls, credits)
- Commission: Percentage of transactions
- Licensing: Fees for using your IP
How to Price Your Product
Tom Blomfield • Y Combinator
Why watch this: Tom Blomfield (founder of Monzo bank) breaks down pricing strategy. Learn about the value equation, free trials vs. freemium, and the psychology of pricing.
Choose Your Model
Which business model makes most sense to START with?
🌟 Smart Choice!
Freemium works well here: free basic access removes friction for students, while premium features (more mentor matches, resume reviews, company introductions) provide clear upgrade value.
👍 Possible, But Hard
Advertising requires massive scale to work (millions of users). With 1-2 hours/month usage, you won't have enough attention to sell. Better to start with a model that works at small scale.
💡 Creates Wrong Incentives
Charging per session discourages usage—the opposite of what you want. Students might avoid reaching out to mentors. Better to align incentives with outcomes.
The Business Model Canvas
9 Building Blocks
1. Customer Segments: Who do you serve?
2. Value Propositions: What value do you create?
3. Channels: How do you reach customers?
4. Customer Relationships: How do you interact?
5. Revenue Streams: How do you make money?
6. Key Resources: What do you need to deliver?
7. Key Activities: What must you do well?
8. Key Partnerships: Who helps you?
9. Cost Structure: What are your major costs?
Design Your Business Model
DesignFill out the Business Model Canvas for your startup:
Example Canvas
Customers: First-gen college students at large public universities
Value Prop: Personalized mentorship and insider knowledge for landing internships
Channels: First-gen student organizations, career centers, Instagram/TikTok
Relationships: Self-serve platform + community support + premium coaching
Revenue: Freemium ($0 basic, $15/mo premium with extra features)
Resources: Platform, mentor network, content library
Activities: Mentor recruiting, matching algorithm, content creation
Partnerships: Universities, alumni associations, employers
Costs: Platform development, marketing, mentor incentives
Price Your Solution
AnalysisDetermine your pricing strategy:
Example Pricing
Value: Landing an internship is worth $10K+ in summer earnings plus career value
Alternatives: Career coaching = $100-500/hr. Career centers = free but limited. LinkedIn Premium = $30/mo
Affordability: Students are price-sensitive, but invest in career. $15-25/mo is doable.
Pricing: Free = 1 mentor match, 3 resources/month. Premium $15/mo = unlimited matches, full library, resume reviews
Why: Free tier gets adoption. Price is 50% less than LinkedIn Premium, yet offers more relevant value. Clear upgrade value with unlimited matches.
🎯 Key Takeaways
- A business model is how you create, deliver, and capture value
- Choose a model that works at small scale first
- Common models: subscription, freemium, marketplace, transaction fee
- Price based on value delivered, not cost to produce
- The Business Model Canvas helps you think holistically