Why the question comes up so early
Someone asks, “What’s your business model?” and your stomach drops.
You have an idea, maybe early users, but no clear answer for how money arrives.
Do you invent a revenue story on the spot, or admit you haven’t figured it out yet?
Both options can work.
The wrong move is faking certainty or mumbling through a list of possibilities.
This guide walks through when to state a business model plainly, when to say it’s unfigured, and how to make either answer sound credible.
Investors, partners, and sharp listeners ask about business model not because they expect a finished plan, but because the answer reveals how you think.
A business model is simply the explanation of who pays, for what, and why they keep paying.
You can describe one in a sentence even when the details are still unsettled.
Michael Seibel of Y Combinator puts startups in two categories in his pitch advice: those that know how they’ll make money, and those that haven’t figured it out yet.
He notes that companies in the second group usually end up monetizing through growth and advertising, or by copying the dominant model in their space.
A smaller subset proposes a genuinely new model that fits how the product changes the market, with freemium as a classic example How to Pitch Your Company.
That framing is useful because it removes the shame from the question.
“Haven’t figured it out yet” is a recognized category, not a confession of failure.
When to state your business model plainly
State a model when you can name it in one sentence and it matches what your product actually does.
If you charge subscriptions, say subscriptions.
If you take a transaction fee, say that.
If advertising is the obvious path for your category, say advertising.
Seibel’s hardest-learned lesson from running Justin.tv is exactly this.
He describes offering a “potpourri” of business models—virtual goods, product placement, chat ads, contests—because he was embarrassed to admit advertising was the real answer.
His advice: own the simple business model How to Pitch Your Company.
The credibility risk isn’t having a boring model.
It’s hedging.
When you list four possible revenue streams, listeners hear that you haven’t committed to any of them.
A plain answer signals self-awareness and focus, even if the model might evolve later.
Choose the plain statement when:
- Your category has a dominant model and you’ll almost certainly follow it.
- You already have paying users or a clear pricing page.
- You can explain who pays in one sentence without jargon.
When to say it’s unfigured
Say it’s unfigured when that’s the truth and you have a reason the timing makes sense.
Some products need scale or user behavior data before a monetization choice becomes obvious.
Pretending otherwise invites questions you can’t answer well.
The key is how you say it.
“We haven’t figured that out” with a shrug sounds like avoidance.
“We haven’t figured it out yet, and here’s the most likely path and what we’d need to learn to confirm it” sounds like a founder in control of their uncertainty.
Seibel’s guidance supports this honesty.
He values product development and customers first, with fundraising and business development a distant second How to Pitch Your Company.
Listeners weighing an early idea care more about evidence of progress than a polished revenue slide.
Showing momentum while admitting an open question is usually stronger than a revenue story built on guesses.
Choose the honest “unfigured” answer when:
- You genuinely have multiple plausible paths and no data to pick between them.
- Your product needs adoption before monetization makes sense.
- Any model you named would raise follow-up questions you can’t answer.
How to answer without losing credibility
Whichever route you take, the delivery matters more than the content.
Seibel’s broader pitch advice applies here: eliminate jargon, marketing speak, and ambiguous terms.
Make your answer sound simpler than you think it should How to Pitch Your Company.
Try his “Email Test.”
Write a two-sentence explanation of what your startup does and how it makes money, then email it to a smart friend.
Ask them to explain it back in their own words.
If they ask clarifying questions, revise.
Email works because you can’t rescue a confusing sentence with tone and hand gestures How to Pitch Your Company.
A few phrasing patterns that hold up:
- Plain statement: “We charge [type of customer] a [type of fee] for [what they get].”
- Honest unfigured: “We haven’t settled on revenue yet. The dominant model in this space is [X], and that’s the most likely path, but we’re focused on [current priority] first.”
- New model: “Our product changes [market behavior], so a [model type] fits where the old [standard model] doesn’t.” Reserve this for when you can actually explain the mechanism.
Notice what all three have in common: no hedging vocabulary, no buzzwords, no apology.
Seibel also warns that passion doesn’t substitute for substance—saying a weak answer forcefully makes you look worse, not better How to Pitch Your Company.
Confidence in a vague model is worse than calm honesty about an open one.
The mistake to avoid: the revenue buffet
The most common failure mode is listing every monetization option to appear thorough.
Subscriptions, ads, partnerships, premium tiers, licensing—listeners interpret the list as “none of these are real yet.”
If you truly haven’t decided, saying so is more credible than the buffet.
If you have a leading candidate, name only that one and note you’re open to alternatives.
One clear hypothesis beats five vague ones.
Timing: when should you actually figure it out?
There’s no universal deadline, but there are useful signals.
You likely need a working answer before pitching investors for significant capital.
You also need it before building pricing into your product.
And before any conversation where someone evaluates your company as a business rather than a project.
Before those moments, the better use of your time is usually validation, not monetization theory.
Testing your idea in public and getting real reactions gives you the evidence that makes any business model answer credible later.
If you haven’t started that process, our guide on why most startup ideas should be tested publicly explains how early exposure sharpens your thinking.
For low-cost validation methods, see how to validate a business idea without spending money.
Business model timing also interacts with team decisions.
If you're weighing whether to bring on a co-founder before your model is clear, see whether you need a business model before finding a co-founder.
A quick self-check before any conversation
Before you walk into a pitch, a partner meeting, or even a curious friend’s question, run through this list:
- Can I state who pays, for what, in one sentence?
- If not, can I name the most likely path and why?
- Have I removed jargon and hedging words from my answer?
- Has a smart friend repeated my explanation back without asking clarifying questions?
- Am I leading with progress and evidence rather than revenue speculation?
If you can answer yes to all five, your answer will land as credible whether it’s a finished model or an honest work in progress.
Turning the answer into a decision record
One practical habit: write your current business model answer down, date it, and revisit it as you learn.
This turns a pitch moment into a tracked decision.
A startup decision memo is a lightweight way to capture what you believed, what evidence supported it, and what would change your mind.
When someone asks about your model months later, you’ll be able to show reasoning, not just a revised guess.
That habit also protects you from the potpourri trap.
When the written record shows you committed to one hypothesis, you’ll notice quickly if you’re drifting back into listing options under pressure.
The bottom line
You don’t need a finished business model to be credible.
You need a clear one.
State it plainly if you have it, own the simple answer even if it feels boring, and say “unfigured” honestly—with a likely path attached—if you don’t.
What kills credibility is vagueness, jargon, and a buffet of maybes.
Clarity about where you are, backed by visible progress, usually beats a polished revenue story.
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