The sharing economy: Disrupting traditional business models

Babar Khan
The Citizens Foundation

Disruptive innovation is the Holy Grail of business. A fascinating example of disruption is being seen in business models arising out of the 'sharing economy'. Defined as the willingness of people to share – often with total strangers – the sharing economy describes a new form of behaviour enabled by global connectivity. Babar Khan describes these business models and explains their appeal to venture capitalists.

How do venture capitalists decide whose business model is worth investing in?

My experience with these shrewd operators is that they typically sit through five or six presentations a day – ranging from the mind-numbingly dull to the instantly appealing.

Since venture capitalists' job is to make money from the businesses they invest in, they scrutinise the logic of the business model very carefully. Red flags go up if the business is planning to enter an already saturated market, if it requires outdated technology, if the sales cycle is extended, if the launch costs are overstated or if there are too many stakeholders.