15 Revenue Models for every startup

11 min readJul 24, 2023

Over the last two decades, the most significant innovation in the sphere of business has been that of the business models. That’s how the Goliaths have been upended by the Davids. Not necessarily by inventing better technologies or devising more clever exaptation of existing technologies, but by giving a whole new spin on how businesses are run. At the heart of new business models are the novel revenue models. Often hidden in plain sight, revenue models, if applied correctly, can make a difference between legacy and bankruptcy. Take the case of how the Software-as-a-Service platforms broke the hegemony of large enterprise software providers. Or the way pay-as-you-work revenue models of co-working spaces have rocked the very foundation of office rental. These are disruptions enabled by the advent of the Internet and precipitated by a greater proliferation of financial tools (a novel business model itself).

Put simply, a business model defines the means through which a firm generates, delivers, and appropriates value. A revenue model or a pricing model is a part of a business model and deals with the element of value appropriation, that is, how the company prices its goods and services and makes a sustainable profit. Alas, profits must be made, or else it’s a disaster in the waiting. In this piece, I share the 15 most popular revenue models adopted by leading startups and enterprises. These are essentially pure pricing models, and you would realize that most outfits adopt a blend of such models to secure a distinctive competitive advantage. So, here we go.

1. Asset Selling

When you buy a car or a furniture, or any other equipment, you are engaging with the most primitive and widely adopted business models of all — Asset Selling. The fundamental requirement here is that the underlying product (not typically a service) is complete and is amicable for a transfer of ownership. Once you buy a car from Toyota, you own it. The company has passed the liability entirely to you. Though there may be services and warranties associated with it, which is a blend of Asset Selling and some other pricing models, which we will discuss later. So, if you make a standard product, in mass and have a wide audience, Asset Selling is your go-to model. The risk, however, is that customer may look at it as a transaction and may have no reason to return to you. That’s why a company never sells you just a car.

2. Commission-based Model

The second most prevalent model perhaps is the Commission-based model or the Transaction-fee based model. That’s how your BookMyShow or MakeMyTrip operates. It’s the staple of almost all Fintech Apps and that of brokerage houses. They take a share of the transaction amount or any variation thereof, such as, number of transactions, profits earned, tiered brokerage, etc. The Visa and Mastercard exploited this model with both the sides of the market — the customer and the merchants — as they get lured by higher transaction amounts and low friction of transactions. Paytm makes money when you wish to transfer amount from your e-wallet to your account. In fact, the very ubiquity of UPI, which exceeds 30 crore transactions per day, is owing to zero transaction fee. So, if used wisely, this is a non-disruptive way of making money.

3. Rental/ Leasing Model

The third most prevalent model is the rental or leasing approach. Here, you take temporary possession of an asset for a limited usage and have a finite liability. Often the financial constructs or rental/ leasing agreements are crafted in a manner as to sweeten the deal for the customer or make it prohibitive, basis the relative bargaining power of the two parties. That’s why renting a bike or a car remains easier than renting an apartment owing to the differential industry legitimacy and risk of abuse. Leasing is a typically long-term rental involving a large upfront payment and little or no monthly fee. It is suitable when your high upfront cost requires a long time to realize returns.

4. Subscription Model

Rentals or leasing are typically for physical assets. If we are dealing with a service, then an equivalent is the Subscription Model. Our very first experiences were that of cable television or the long-distance telephony, the STDs or ISDs. The more common versions are the Netflix or Amazon Prime membership of the present day. Subscription gives you a limited period right to avail a service. Interestingly, the payment has nothing to do with the actual usage of the service. Whether you watch a movie, or you don’t watch anything, you still pay for your right to watch the movies — that’s the subscription model. It suits when you want to personalize the user experience and yet have largely the same asset to offer.

5. Pay-as-you-use Model

The rental, leasing, or subscription models offer you the right-to-use but doesn’t bother whether you are indeed availing the product or service. This limitation is overcome by the pay-as-you-use or pay-per-use pricing models. Today, your phone rental is largely based on your usage pattern, not only of voice but also data. It helps the customer regulate the usage, as well the provider to decide the rental based on number of users and the overall fixed cost, which is typically very high. AWS, or most SaaS platforms, are good examples of pay-as-you-use model and hence very lucrative for startups that would do anything to avoid upfront capital expenditure. Pay-as-you-use pricing model essentially breaks down the high fixed cost into a variable cost, whereby easing the adoption and scaling of the service.

6. Bait and Hook Model

Also known as the Printer-Cartridge Model, the Bait-and-Hook model thrives on a low margin one time sale of a durable asset, followed by high-margin recurring sales of the consumables. Think of HP selling you the printer for under INR 2000, but making a handsome profit on the INR 900 cartridge. Or Gillette charging you almost INR 100 for a single Fusion blade, but the razor was the bait that got you hooked to the overall habit of a close shave. Basically, the profit realization is deferred to once the habit sets in, much like what Amazon does by selling you a Kindle at cost and then pushing non-best-sellers to your device. The company claims that those using Kindles now buy 3.1 times as many books as they did before owning the device.

7. Freemium Model

A close cousin of the Bait-and-Hook pricing model is the Freemium pricing. As the name suggest, it’s a concatenation of free and premium pricing models. LinkedIn or Truecaller is a case in point. You can access the basic features for free and once you have seen the benefits you can always upgrade to ‘unlock’ advanced features. Such feature-rich pricings are indeed premium. For instance, LinkedIn almost charges you INR 5000 per month for a premium subscription, which mostly recruiters and head-hunters go for. It suits their own pricing models. A variant of Freemium model is where you are offered a limited period access for free and then you pay thereafter. Like when WhatsApp was first launched, its terms read as: Free for 52 weeks and then INR 10 thereafter. Of course, Meta had some other plans.

8. Attention-based Models

How do you get to watch live matches on your television, without paying any match fee? Or, get high quality content on Youtube, often full movies, without coughing as much as a penny. It’s the magic of advertisement-based revenue models. We often forget that the biggest currency is your attention (and time). And organizations know how to subtly influence your choice towards their targets. Right from the humble newspaper with paid advertorials, to Youtube, and even signages inside and outside your aircrafts are all exhibits of Attention-based models, except they seldom get that much attention. That’s where Skip-Ads itself becomes a bait for the subscription-based model, as in Youtube or even Forbes. This model works when you have a captive audience, the ads are relevant and curated, and the surprise element is maintained.

9. Success-based Fee

Think of a high-risk, high-returns scenario, such as law, consulting, startup funds raising, or even surgery, and that’s where both the parties must have a skin in the game. Your lawyer will take a base free that would dissuade any opportunism on your side, like hiring multiple lawyers for the same case, but would charge you the big chunk only if the judgement goes in your favor. McKinsey would often link its fee to the business impact its advisory would create. Fund raising platforms like Kickstarter would ask money once you have raised money. Such models are prevalent in a highly competitive scenario, where the provider of some niche, specialised offering could distinguish basis taking a position on the outcome, and not just the inputs. Think of investment bankers or hedge fund operators — they work on high upside, manageable downside scenarios.

10. Per-module pricing

How does an online learning platform or an online university charge you for their courses? They would break up an entire diploma program or a degree course into smaller modules and get you to take those in a piece-meal approach. You can pay for whatever you think you need and have the financial and intellectual appetite to assimilate. This modularization offers you a middle path between taking the full course versus not even opting for anything. Or even OYO Rooms, or previously, Ginger Hotels, where you would be paying for an extra blanket, parking, wifi, breakfast, bedding, and other necessities, atop a very stripped-down room rental. It works for the convenience the customer now has, to be able to take what she wants and throttle the service and payments. The issue here is to upsell the customer the entire package. So, both margins and customer loyalty might be hurt.

11. Donation-based

Ever wonder how Wikipedia makes money (by the way, it’s not that much)? It’s through donation, by people such as you and me. Jimmy Wales, the firm’s founder is even okay with you donating as little as $5. But no compulsion. The reason they kept Wikipedia ads-fee, or advertorial-free, is to maintain the legitimacy of its content, or more significantly, remain intellectually honest. The Open Source Initiative (OSI) is another setup run by donation. It’s indeed risky but offers a lot of gravitas and has a self-selection mode in terms of audience, content creators, and critiques. You can think of BBC network operating at the benevolence of the British government and hence, unlike almost all other news channels, they hardly show ads, or even display their logo during news delivery. But this model is for larger causes, and hence rarely adopted.

12. Pay-as-you-wish model

A variant of Donation-based model is the pay-as-you-wish model. Here, payment is expected but the price discovery is left to the individual. There are restaurants and mostly religious establishments, such as hostels, accommodations, charitable institutes, where you can avail food and lodging, but aren’t compelled to pay as per the rate card. You may pay, basis your capacity or desire, but there’s no expectation. Now, you may argue if it qualifies to be even called a pricing model, but if you are operating a home kitchen where you serve whatever is made, you accept whatever is offered, and that keeps your enterprise going. A precarious model indeed, but can work wonders if coupled with passion and hobbies, such as book clubs, yoga classes, and musical gatherings. Surprisingly, when people are left on their own to pay as they desire, they often pay more than what covers the cost. So, it’s a faith-based model.

13. Licensing

A very premium model is licensing. We all know the amount of money Microsoft or McAfee Antivirus suits make by licensing their products to users. The underlying strength comes from the fiercely guarded intellectual property (IP). Unlike Asset Sale, the Licensing model is only a limited period and non-transferable right to use a product by a specific customer. Its legitimacy comes from law enforcement and that’s why in countries like India and China, where IP regulations are laxed, license-based revenue models aren’t adopted by domestic companies. If you have a unique IP, a solid legal team, and a customer lock-in mechanism, licensing is a very attractive pricing model. The branded pharma firms license their patent protected processes and products to generic makers, whereby pocketing lion’s share of margins.

14. Dynamic/ Surge Pricing

You first heard about Surge Pricing while dealing with Uber. Ola followed suit and now it’s all around us –flight bookings, tariffs at holiday resorts, restaurant tables, and even local bars and pubs (there is one by the name The Bar Stock Exchange). In fact, surge pricing is based on momentary supply-demand gaps and the prices are revised to either moderate the demand or boost the supply. The earliest adopters of such dynamic pricing models were the airline operators, who spiked the price based on parameters like, number of days to departure, availability of inventory, overall competitive scenarios, fuel prices, and other external factors. More recently, IRCTC has adopted a dynamic pricing model, which nudges you to plan your travels more carefully and make the most of bargains on early bookings. It works well when the inventory is perishable.

15. Data-selling model

Finally, we have the most debatable and grey means of making money — commercializing somebody else’s data. The Big Tech — Apple, Google, Meta, Microsoft, Amazon — are sitting on massive and intimate data of yours. Data that you don’t even know you generate. If in wrong hands, like on the Dark Web, this could create havoc, but even in the most benign ways firms don’t shy away from exploiting this data. Netflix collects tens of data points per customer, including the most innocuous ones like, specific pauses and skips during a show, and then effectively prays on your attention. What makes you confident that Netflix is the only audience to your data? While you may think that I am getting a raw deal with no fee, no ads, no annoyance, but most of us are trading something far more precious — our discretion.

The table below summarizes the various pricing models.

As discussed before, most companies adopt a mix of pricing models to get the most of the market and yet maintain a competitive differentiator. For instance, Indigo does Rental of tickets, Dynamic pricing during seasons, Freemium for seat selection, Attention-based for in-flight ads, Commission on in-flight food and beverages sold, and perhaps Data-selling. Multiplicity of pricing models help ring fence the company from competitive uncertainties and even build customer stickiness. If you are operating in a two-sided market, like that of Oyo Rooms, you can experiment with combination of pricing models, basis the stage of your business, tiers of customers, and economic cycles.

Hope this piece was useful. Do share if I have missed out on any prominent, pure revenue model.




Innovation Evangelist and author of the book, Design Your Thinking.