Convertible Notes and Startup Funding
February 12, 2025
Artificial intelligence (AI) and machine learning (ML) are disrupting the entire business landscape across the globe. The retail industry is no exception. Leading retailers from across the world have started experimenting with Artificial intelligence (AI) and machine learning (ML). There has been an influx of various technologies into the sector in order to shape the […]
Over the counter markets are a particular type of financial market. Generally, financial markets are centralized. This means that there is one central body that is a counterparty to all the trades being made. For instance, if A wants to trade with B, the transaction does not happen directly. Instead, A trades with the centralized […]
Portfolio management refers to the art of managing various financial products and assets to help an individual earn maximum revenues with minimum risks involved in the long run. Portfolio management helps an individual to decide where and how to invest his hard earned money for guaranteed returns in the future. Portfolio Management Models Capital Asset […]
Founders spend a lot of their time trying to understand how to deal with potential investors. They try to understand the various techniques that need to be deployed in order to ensure that prospective investors view the startup company as a compelling proposition. In their quest to project their startup company as the best, founders […]
Money market instruments are considered to be very low-risk investments. This is because the money market as an asset class is considered to have a considerably low-risk profile as compared to other asset classes such as equity and debt. The main reason for the low-risk profile is because money market instruments consist of a large […]
Whenever we talk about modern start-up corporations, we assume that the company is engaged in some kind of an online business model. However, that may not always be the case. There are many start-ups that have transformed existing businesses by completely changing the business model and revenue model of underlying industries.
One such business model which transforms existing businesses is called product as a service. This model has been widely used by many start-ups to transform old asset-heavy industries such as automobiles, electronics, etc. In this article, we will have a closer look at what the Product as a Service (PaaS) business model is all about as well as the reasons behind its popularity.
The product as a Service (PaaS) business model is a new kind of business model wherein sellers convert their linear revenue model into a cyclical revenue model. A linear revenue model means that the company only manufactures the product and sells it in lieu of a one-time payment.
For instance, a car company manufactures a certain model of car and then sells it. Hence, the revenue of the company is dependent upon the number of cars that it sells in any particular period. Therefore, the model is called linear. Since the company only makes money when it sells more cars, there is always an incentive to lower the quality using what has been called planned obsolescence.
However, the Product as a Service (PaaS) business model changes this paradigm. Under the new model, the company does not simply sell its cars to customers for a one-time payment. Instead, they bundle the car with other services such as maintenance and insurance and offer the bundled product as a subscription.
Hence, instead of paying for a one-time product to buy the car, the customer uses the car as a service. This means that they use the car just like they would use their cable television, telephone, or any other such service. This transforms the one-time payment that the company is bound to receive into smaller cyclical payments. Therefore, the revenue of the company is not only dependent upon how much they produce and sell. They can continue providing services and generate revenue from sales that were made in previous periods as well.
Many traditional companies, as well as start-up companies, have realized the benefits of the Product as a Service (PaaS) business model. Hence, they want to transform their existing business into this model. This can be done in the following manner.
From a customer’s point of view, the switch to Product as a Service (PaaS) can only be justified because of the higher convenience that it offers. This should be relatively easy if the company is selling products that are targeted at millennials. It is relatively easier to convince millennials since they already tend to focus more on the experience.
For instance, if a person starts a family and needs a more spacious car, they can simply subscribe to a more spacious car without having to go through the hassle of selling the old one first. Both these points can be used by the firm to justify the premium it charges to the customers when they sell the bundled product using the Product as a Service (PaaS) model.
For example, a customer will receive a subscription bill every month. Hence, it is important for the system to generate accurate bills in a timely manner. Similarly, the systems will have to be overhauled to allow the monitoring and maintenance of vehicles on a large scale. The inability to do so is likely to hinder the transformation of a product-based business into a Product as a Service (PaaS) based business.
Your email address will not be published. Required fields are marked *