Deferred Value

What is Deferred Value?

Imagine you’re building an app. Right now, it has zero users and makes zero money. But you believe it has massive potential in the future. That’s deferred value.

The “Instagram Effect”

Remember Instagram? When Facebook bought it for $1 billion in 2012, it had:

• Zero revenue
• 13 employees
• Just an app that made photos look prettier

But what it had was:

• 30 million active users
• Massive growth potential
• A chance to dominate social photo sharing

That’s deferred value in action. Instagram wasn’t valuable for what it was earning at the time, but for what it could become.

Why Should You Care?

Startups are like seeds – they may seem worthless at first, but with the right care (and a bit of luck), they can grow into mighty trees.

Think about:

• Facebook started as a college dating site
• Amazon just sold books
• Google was just another search engine

They all had huge deferred value that no one could see at the time.

Deferred vs. Immediate Value

Immediate Value

• Customer pays $10 for lunch
• Buys a movie ticket to watch now
• Purchases software for instant use

Deferred Value

• Investing in employee training
• Building brand awareness
• Developing new technologies
• Creating market share

When Deferred Value Matters Most

Talking to Investors

You: “We’re not making money yet, but…”
Investor: “Tell me about your growth potential.”

This is where you explain your deferred value – not about what you’re worth now, but what you could be worth when your plan comes to fruition.

Making Business Decisions

Should you:

• A) Start charging $5/month now?
• B) Keep it free and grow rapidly?

If your deferred value is high enough, option B might be the best choice, just like WhatsApp did!

How to Spot Good Deferred Value

Good Signs

• Fast user growth
• Users love your product (even if it’s free)
• Big market potential
• Network effects (gets better with more users)

Warning Signs

• Users don’t stick around
• Small total market
• Many strong competitors
• No clear path to future revenue

The Bottom Line

Don’t focus too much on what your startup is worth right now. Instead, build something with long-term potential. That’s what deferred value is all about.