By Alan W
I’ve noticed that when people talk about “platforms,” they often mean very different things. Some are referring to a piece of technology - a website or app that connects people. Others are talking about a business model - a way of creating value by facilitating interactions between different groups. The problem is, these two things are not the same, and many founders (and even investors) blur the lines between them.
Let’s break it down.
A Platform as Technology
At its simplest, a platform (as technology) is just a tool. It’s the software that enables transactions, connections, or interactions. Think of it like a job board, an applicant tracking system (ATS), or even a recruitment marketplace. It’s a system that people use, but it doesn’t necessarily create value on its own - it’s only as useful as the people who use it.
A lot of “platforms” in the startup world today are really just SaaS businesses with a marketplace-like interface. They charge subscription fees for access or take a percentage of transactions but don’t necessarily scale through network effects.
A Platform Business Model
A true platform business model is more than just technology - it’s a way of organising economic activity. The key difference? It doesn’t just provide tools; it facilitates interactions between two or more user groups (e.g., buyers and sellers, job seekers and employers, hosts and guests).
Here’s what sets platform businesses apart:
Network effects: The more people use it, the more valuable it becomes. Think about how Airbnb’s value grows as more hosts and travellers join.
Multi-sided revenue models: Unlike SaaS, which charges a single user group, platform businesses often make money from multiple sides (e.g., transaction fees, listing fees, premium memberships).
Minimal direct ownership: Platforms don’t own the core assets being transacted. Uber doesn’t own cars; Airbnb doesn’t own real estate. Instead, they provide the infrastructure for others to create value.
Why This Matters for Founders
If you’re building what you call a “platform,” ask yourself: Is it just software, or is it a true platform business? Many startups start as SaaS tools and later try to pivot into platform models - but that shift isn’t always easy.
Some key questions to consider:
How does value increase as more users join? If the platform is just a tool, it won’t benefit from network effects.
Who owns the core value being delivered? If your platform requires you to create most of the value (instead of your users doing it), it’s likely more of a SaaS model.
Can it scale without increasing costs linearly? SaaS scales through automation; platform businesses scale through user participation.
Final Thoughts
Technology is important, but technology alone doesn’t make a platform business. The real magic happens when a platform creates an ecosystem - where users provide value to each other, and the business simply facilitates those interactions.
This is something I’m deeply passionate about. I love helping founders think through their platform strategy, whether it’s refining their business model or optimising their marketplace for growth. If you’re building a platform (or think you are), I’d love to hear about it.
→ Work with Alan W
Illustrator: Lisa Williams (Instagram: @artist_llw)