Creating a revenue stream

There is only one way to create a genuine revenue stream, that is to provide value in return. This places a further restraint on the type of business that can be chosen and provides a fourth rule:

4) The business must be able to provide value right from the start.

Investment capital can only be treated as revenue if adequate returns can be guaranteed. However, as profitability cannot be predicted, this condition cannot be met, so, investment capital shouldn't be used in an e-business venture where the outcome is uncertain.

Seed capital can qualify as revenue if the probability of gain heavily outweighs the risk of loss. As a rule of thumb, seed capital can only be treated as revenue if there would be a reasonable expectation that a business could advance to where the investor's share could increase in value by a multiple of between ten and twenty. To expect to obtain better terms than this for seed capital would be unrealistic.

A different approach to obtaining start up capital is to be able to offer a solution to a difficult or unsolved problem. In this case, seed capital could be regarded by the finance provider as research and development costs – on the understanding that there is a reasonable chance a problem can be solved. This provides a fifth rule for the choice of business:

5) The business must be such as to be able to solve immediate and real problems.