Fred Wilson:

The first several years of a subscription based business will typically require a fair bit of funding because the revenues come in over time instead of up front. But once a subscription business reaches scale, it has very favorable cash flow dynamics, as mentioned above. For these reasons, subscription based businesses are good businesses to raise capital for and investors generally find them attractive to invest in.

In many ways, the subscription business model is the most attractive of the “big three” (advertising, commerce, and subscriptions).

Building a sustainable business requires consistent revenue, and the web (along with SaaS) has finally afforded developers an opportunity to keep revenue flowing consistently, rather than being a one time event. The upside for customers is that software gets cheaper up front, so it’s easier to try something new.

Nathan Barry’s challenge will be interesting to watch in this space.