Page - 89 - in Digital Entrepreneurship - Impact on Business and Society

Entrepreneurs use the venture pyramid to structure the dynamic search process for a product market and business model fit, to run experiments, and thus to improve thedecisionmaking incircumstancesofhighuncertainty.Atevery levelof the venture pyramid, an entrepreneur hasmultiple options to design an experiment (see also Göcke and Weninger 2020). The specific characteristics of platform businessmodels add a new complexity to the validation/invalidation of a business idea (Table 1). 3 ConceptualModel and Empirical Insights Thedevelopment andvalidationof platformbusinessmodels gohand inhandwith a couple of specific challenges for a digital entrepreneur. In the following section, we apply the specific characteristics of platform business models to the venture pyramid. Furthermore, we look at the dynamics of platform business models and alternatives to develop a minimum viable platform to validate the product market fit. 3.1 Venture Pyramid for PlatformBusinessModels The venture pyramid has been discussed as a structured approach to develop and test an entrepreneurial venture. As discussed before, there are four specific char- acteristics of a platform business model that distinguish this type from a pipeline business:multi-sidedness, networkeffects, chicken-egg-problem,andwinner-takes- all/-most situation. Considering themulti-sidednessofaplatformbusiness, a startupneeds tocreate value for at least twosidesof theplatform.Following theAirbnbexample,wehave guests representing thedemandside (SideA)andhosts representing the supplyside of the business (SideB). Both sides need to demand the platform to connect them either to sellers/buyers (transaction platform) or to connect them to complementors/users (innovation platform). The validation of the demand from both sides is central to the success of the platform business model. Therefore, a Table 1 Special characteristics of platform business models impact the experimentation of a venture idea Multi-sidedness More than one actor on a platform requires experimentationwith differentmarket sides Network effects Utility for a customer depends on the number of users from the other market side.Experiments to test the importance andstrengthofnetwork effects are required Winner-takes-all/- most Tendency to single-homing ormulti-homing to be tested Development and Validation of Platform… 93