When should a company begin extracting revenue or monetizing a product?

Paul Graham · published Mar 2005

Web companies should put users before advertisers and design the product to please users first, then figure out monetization.

If you get all the users the advertisers will follow; failing to put users first leaves a gap for competitors who do.

Scope: Web companies

source How to Start a Startup

Paul Graham · published Oct 2005 · hedged

In technology valuable ideas are close enough to good ideas that you can pursue good ideas and only ask at the final stage whether people will pay.

Only a few ideas make it that far and then get shot down; RPN calculators might be one such example.

Scope: especially in technology

source Ideas for Startups

Paul Graham · published Oct 2006

Startups should postpone the business model and first solve the core problem of making something people want.

Making something people want is much harder than making money from it; the core problem is creating wealth, not converting it into money.

Scope: initially / version 1

source The 18 Mistakes That Kill Startups

Paul Graham · published Apr 2008

Founders should not worry too much about the business model at first — not because making money is unimportant, but because it's much easier than building something great.

Not because making money is unimportant, but because it is so much easier than building something great.

Scope: at least at first

source Be Good

Guy Podjarny · published May 24, 2023

Snyk's core early bet was that if they cracked developer adoption of a security product, revenue would follow

Getting developer adoption was what worked from the beginning, so it was treated as the single most important thing to crack

20:34 20VC: Why Being First To Market Does Not Matter, Why You Do Not Have Defensibility on Day 1, How to Analyse Market Size and Present it to Investors, Vitamins vs Painkillers; Do Vitamins Survive Recessions and Good vs Great Messaging with Guy Podjarny @ Sn

Harry Stebbings · published May 24, 2023

Companies like early Snyk and Twitter face the same problem: a great product with users still has to have a working business model layered on top.

35:52 20VC: Why Being First To Market Does Not Matter, Why You Do Not Have Defensibility on Day 1, How to Analyse Market Size and Present it to Investors, Vitamins vs Painkillers; Do Vitamins Survive Recessions and Good vs Great Messaging with Guy Podjarny @ Sn

Jean-Michel Lemieux · published Mar 20, 2024

A company's single priority is building a product people love and tell their friends about; monetization can be figured out over the following years

If you do that for ten years you're in an okay position with flexible levers for monetization, whereas time spent on spreadsheets makes you forget priority number one

Scope: assumes you monetize enough to keep going; framed as a long game, roughly the first ten years

11:13 20Product: Why Process is Killing Your Product Team and How to Remove it | Three Product Decisions Every Team Needs to Make | Why the Best Companies Build Movements and Lessons from Shopify and Atlassian on How to Do It Right with Jean-Michel Lemieux

Kaz Nejatian · published Aug 14, 2024

Shopify's priority order — build great products, then make money, then never reverse one and two — is the right stack, and holding it is extremely hard for a public company of Shopify's size.

Toby ingrained the ordering and it forces most time to be spent on product rather than on monetization.

Scope: specific to Shopify's context as a public company

9:03 20VC: Lessons from Mark Zuckerberg, Keith Rabois & Tobi Lütke | Why Remote is a Bad Idea for 90% of Companies | The Framework for How Shopify Builds Product Today | What Humans Get Wrong About Marriage and Kids with Kaz Nejatian, COO @ Shopify

Severin Hacker · published May 19, 2025

Duolingo's biggest early mistake was waiting far too long to take monetization seriously — it should have started about two years earlier.

The company operated under a business model of 'raise more money', treating venture capital as the business model; once they ran monetization experiments properly and doubled down on what worked, it became very good.

Scope: says the mistakes were not fatal

57:46 20VC: Duolingo Co-Founder on Why $3M is Harder than $100M to Raise | Why You Should Always Take Tier 1 VCs Even at Worse Terms | Why Europe Can't Win Unless the US Screws Up | How AI Impacts the Future of Work and Education with Severin Hacker

Cem Kansu · published Jun 20, 2025

Duolingo's biggest product mistakes in hindsight were starting monetization roughly two years later than it could have, and waiting too long to apply Duolingo's mechanics to new subjects

The mechanics and competency were already in place, and finding product-market fit for new subjects is a long journey, so starting math, music and chess earlier would have been better than the projects they funded instead

Scope: acknowledges hindsight bias

62:10 20Product: How Duolingo Build Product 10x Faster with AI | Duolingo's Biggest Lessons on Paywalls, Push Notifications and In-App Purchases | Why Small Teams are the Future of Product | Why PMs Will Become Extinct with Cem Kansu, CPO @ Duolingo

Harry Stebbings · published May 24, 2023

Developer adoption and developer love do not reliably convert into revenue

Many tools get a lot of developer adoption and love and revenue still does not come

20:51 20VC: Why Being First To Market Does Not Matter, Why You Do Not Have Defensibility on Day 1, How to Analyse Market Size and Present it to Investors, Vitamins vs Painkillers; Do Vitamins Survive Recessions and Good vs Great Messaging with Guy Podjarny @ Sn

Guy Podjarny · published May 24, 2023

Getting developers to love a dev tool is a far smaller problem than getting a commercial business going from that love, and founders systematically underestimate that gap

At Snyk they successfully won developer adoption with tens of thousands of users, then opened payments and almost nobody paid; they were still at $100k ARR two years and many millions of dollars in

Scope: based on his own Snyk experience; developer tooling markets

20:59 20VC: Why Being First To Market Does Not Matter, Why You Do Not Have Defensibility on Day 1, How to Analyse Market Size and Present it to Investors, Vitamins vs Painkillers; Do Vitamins Survive Recessions and Good vs Great Messaging with Guy Podjarny @ Sn

Harry Stebbings · published Jun 19, 2023

Proving value to users does not mean they will pay for it

Scope: learned from his own experience with Panda

50:48 20VC: Why No Models Today Will Be Used in a Year, Why Open Will Always Beat Closed in AI, Why Proprietary Data is Less Important Than Ever And Why EU AI Regulation is a Disaster with Alex Lebrun, Founder & CEO @ Nabla

Harry Stebbings · published May 19, 2025

As an investor he would never push an early consumer company to monetize, because engagement, user behaviour and habit formation matter more than putting up a paywall.

You want habit-forming behaviour first and a paywall obstructs that.

Scope: early-stage consumer products

58:40 20VC: Duolingo Co-Founder on Why $3M is Harder than $100M to Raise | Why You Should Always Take Tier 1 VCs Even at Worse Terms | Why Europe Can't Win Unless the US Screws Up | How AI Impacts the Future of Work and Education with Severin Hacker

Jason James · published Aug 29, 2025

The timing of value extraction should be set by whatever maximizes customer lifetime value, so delaying monetization is right only when you have a reasonable hypothesis it raises LTV

Absent such a hypothesis you're just hoping it becomes valuable, and selling a dollar for a dime isn't a business

Scope: only as long as the business can survive the interim

31:38 20Product: Why Most CPOs are Bad | Why You Do Not Need PMs in a World of AI | Why the Design Stage is Dead and How to Use Vibe Coding to Replace It | The Three Roles All Founders End Up Firing on Repeat with Jason James @ Tezi

Clem Delangue · published May 12, 2023

For a platform with network effects like Hugging Face, adoption and usage is the number one KPI and monetization should not be optimized for maximum revenue yet.

Usage is delayed revenue; if Hugging Face remains the number one platform companies use to build AI, revenue will follow, and consumer-platform experience (Facebook, Twitter) shows adoption must come first.

21:03 Network effects platforms should prioritize adoption over near term monetization

Severin Hacker · published May 19, 2025 · hedged

It was counterintuitive and unhelpful that Duolingo's investors never pushed the company to monetize.

Those investors were also in Twitter and similar platforms where growing users first was always the right call, so they applied the same playbook.

58:31 Investors modeled on ad supported platforms wrongly avoided pushing monetization

Cem Kansu · published Jun 20, 2025

Calling Duolingo's late start on monetization a mistake is hindsight bias — there were real headwinds at the time, chiefly a mission and a launch promise built around never monetizing

Duolingo launched publicly promising never to have ads, in-app purchases or subscriptions, with a crowdsourced-translation business model instead, and the company believed monetizing would ruin a great consumer product

28:32 Hindsight bias real headwinds justified delayed monetization at the time

Cem Kansu · published Jun 20, 2025

The prevailing 'Facebook model' advice to just grow and ignore monetization was good advice but incomplete — you can monetize while keeping high retention and growth

They assumed monetization would kill retention and it didn't; tastefully implemented ads on Duolingo were retention-neutral

30:52 Monetization and high retention growth are compatible if tastefully implemented

Cem Kansu · published Jun 20, 2025

The right frame is habit building rather than addiction, and in-app purchases should only be layered on after you have strong daily retention on the core experience

Fluency requires thousands of hours of practice and you can't binge your way to it, so a daily habit is the prerequisite; once that exists you add optional extras like streak freezes that can be monetized

49:39 Build daily habit first then layer optional monetization extras

Yamini Rangan · published Mar 18, 2025

Companies that slap on an AI SKU and price it before proving value see churn; the right sequence is build the product, confirm repeat usage and repeat value, then scale and price it.

Customer value has to be the north star — repeat usage is the signal that justifies scaling and monetizing.

31:56 Prove repeat usage and value before pricing ai features

Paul Graham · published Oct 2006

Some startup founders believe it is irresponsible not to focus on the business model from the beginning.

They are encouraged in this by investors whose experience comes from less malleable industries.

source Founders believe focusing on the business model from day one is the responsible choice encouraged by investors from less malleable industries

Paul Graham · published Oct 2006

Neglecting the business model is irresponsible, but neglecting the product is ten times more irresponsible.

source Neglecting product is far more irresponsible than neglecting business model