The Profitable Startup

The reason for prioritizing growth above all else, historically, is network effects. If you try to grow more slowly someone buying growth by foregoing profitability will zoom past you and capture the network, and once the network is captured it's incredibly difficult to disrupt.

A good recent lesson in the awesome power of network effects is X. A huge number of users on that platform hate the direction Elon -- and it -- have taken, but they still use it. Major brands still use it. Governments targeted by people Elon is amplifying use it. Journalists who hate it use it. Why? People use it because people use it, and it's hard to get everyone to migrate at once.

Network effects are a force of nature. They are the strongest possible lock-in.

I forget exactly who said it but somebody said something along the lines of “venture capital is rocket fuel, unless you have a rocket it will only blow up your engine. Have a Bugatti Veyron? It will blow up your engine.”

This is also something DHH has been saying for years. However, I think it is more true now than ever. With how easy it is to start and scale a software company I really struggle to understand the justification for venture funding at the earliest stage, unless you want to larp as a founder, have low conviction, or just want “the experience”.

I think the author is correct that more startups can be profitable earlier than they think. It comes down to making conscious decisions about hiring and focusing on customer value, it's that simple. The reason why that's not the case often comes from how blitzscaling and ZIRP became the norm for a few years, and how VC, especially post seed stage, started to resemble a Ponzi scheme, with investors trying to put lipstick on a pig and pass the bag down the road.

Profitable startup works for founders, but it doesn't work for the venture capital industry.

But it's hard to be a profitable, bootstrapped startup when rocket fueled / venture-backed startups are too busy growth hacking and venture-funded blitzscaling to capture customers at low cost to the customer, only later to screw the customer when it comes time to either flip the company to a buyer in order to return those VC dollars, or to turn the screws on the customers and enshittify the product when blitzscaling is no longer feasible.

Personally, I prefer a bootstrapped, profitable startup in markets where blitzscaling venture-backed rockets aren't raiding the customers.

I wouldn't necessarily call growth-hacking / blitzscaling to capture customers at a loss network effects. More accurately it's about cornering the market or dominating market share. Network effects are more prominent for things like social media networks where the network value grows exponentially with scale. But not as much for a B2C or B2B solution where there's an identifiable or fixed number of customers and the rocket fueled competitor captures them all with unsustainable pricing.