Traditionally businesses then require massive initial investments to start and take off to their forecast (or bet) potential. Now with the adoption of internet technologies, businesses only required lesser initial investments and can expand accordingly to the response of the market. It is OPEX-Driven, while traditional businesses are CAPEX-Driven.
There is a stigma of the "current-time" business model that the investor looking for are only OPEX-Driven. We can see this philosophy apply especially in the incubator programme. Why? There are lesser risks as the investor can give out funds by stages according to the business performance. The business only required a certain amount of investment to capture a certain size of market share, and later the investment gradually increases as the business is able to prove its ability to capture the market share as they grow.
CAPEX-Driven are higher with risk guided with the economic model based on just assumptions. However, sometimes large CAPEX initial investments are required for certain industries which are mainly at the top of the supply chain which involves extraction, manufacturing and logistic. Since the hardware technologies that are required are advanced and difficult to be made.
Therefore, the decision to be made in new ventures are based on our ability to afford the risk. To be at the top of the supply chain have their advantages, mainly lesser competition compared to being at the bottom part of the supply chain. Hence, once our CAPEX-Driven is able to prove its sustainability, which usually reflects its sustainability for a very long time.
However, including myself, we need to start with the OPEX-Driven ventures, as an example scenario, the burger flipper should rent the burger stand rather than purchase it as his “asset”. Why? At the bottom of the supply chain, where the businesses are more customer-centric, are required to be agile to adapt to the market behaviour/response and the competition. And later as we established ourselves as a preferred brand in the particular industry, we can grow and increase the CAPEX. Basically at that time, we can afford risk while maintaining the ratio of high OPEX and low CAPEX business.
Soon, as our OPEX-Driven businesses perform with a steady cash flow, these can protect us as insurance when taking the risks of investing CAPEX-Driven ventures. CAPEX-Driven businesses have fewer competitions to face in their landscape which able the businesses to capture massive market share.
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