I think you're misinterpreting Joe Kraus. I've seen him do his "Startup Addict" presentation twice now, once at Startup School and once at a YC dinner, and in neither instance did I come away with the impression that he meant you have to start making money immediately.

The meaning I took from this "business model in beta" statement was, "you have to be willing to admit you don't understand how you're going to make money; be willing to evolve the business model based on what you learn after launch". Which seems entirely consonant with what pg has said.

Quite possibly I am. I thought he was saying this after not releasing his premium account types for JotSpot initially and getting different feedback than he would from people actually willing to pay.

I'll buy that, too.

Anyway, I think the "beta" aspect of that statement is "try it and see, and change it if it's wrong". If your business model is "everything is free and I hate ads", then you'll soon find out that it's wrong. ;-)

It also ties into Kraus' favorite saying: You make what you measure.

Time to bring in some reid hoffman logic:

The order at which you deploy features should prioritised as follows:

a) User acquisition b) User retention c) Monetisation

pg states makes something people want first, which covers a and b then figure out c. If you plan to charge for your product you have to consider which features people would pay for and not give them away for free initially as you will not be able to charge for them later.

If you don't want to charge directly - then focus on building the user base and you'll have an audience which you can figure out from what would keep them and let you monetise through advertising. Generally in consumer ad plays focus on reaching and keeping users first, as you'll be able to sell advertisers on that.

We are doing our business plan in beta during our product launch, for a few reasons.

1. its defining our feature set 2. as software folk, we are still learning about business, and its easier to walk first, and then run 3. we need the money now, we don't have valley funders to give us gobs of money in Milwaukee, WI. I think the state tracked 3-5 million here last year in angel funding. 4. our evaluation will be higher with revenue and on the ground business knowledge.

You already posted about this once before. My strategy has been to start with small, unobtrusive ads, just to get people used to the fact that, yes, there are ads. You can also get some idea of how much money a few small ads will generate.

Decisions...