11–20 of 175 posts
Reasonable growth that balances LTV and CAC is nice and pragmatic but it's not a winning strategy when your competitors are putting the pedal to the metal.
Is this true? > I have observed that few people understand these nuances and the significant role they play I've been out of the venture-backed world for a while, so it's an honest question. Few people understanding business basics would certainly explain a lot of recent behavior, but there are other possibilities too.
As seen at Amazon.com
How so? Amazon didn't jave that many unprofitable quarters, even less years, during its history. That Amazon was never profitable because they prioritized growth is a meme made up buy various start-ups to explain their lack of profits and/or positive cash flow.
And it looks like that recent profitability is more about AWS than their traditional core business: https://www.visualcapitalist.com/aws-powering-the-internet-a...
Long story short, when the properties were eventually sold out, I burned my cash flow to buy more of them to other players, at a high price, when they needed money (it would also allow them to play longer)
My logic was that by owning the most properties and by building houses and hotels, I would have the most revenue on the long run. And had the game been endless, I would have won.
However, the chances of someone going on your property isn't even high in this game ! You can sometimes wait for several rounds before this happens.
Unluckily, I stumbled on a rent I couldn't pay, mortgaged some properties. It happened again, and other players would only buy my properties at a price to cover the rent.
And my empire (i had the most properties by far) was on the verge of collapse when I had to run to go to the station.
So yeah, consider the payback period, even in the simplest models of the economy. Monopoly is economy taught to children, yet we adults can overlook its lessons.
“This forced other disciplined startups to loosen their ad spend to be competitive in the venture-market industry and created an era of capital-inefficient businesses. With time, this will re-adjust back to historical norms and the process will be painful.” I thought this was a pertinent quote. You’re going to see many companies deciding to become cash flow positive instead of growing. And if the business is stable,…
Earlier quoted context omitted.
How so? Amazon didn't jave that many unprofitable quarters, even less years, during its history. That Amazon was never profitable because they prioritized growth is a meme made up buy various start-ups to explain their lack of profits and/or positive cash flow.
Are we looking at the same numbers? I think Amazon was basically breakeven for 20 years, from 1997 to 2017: https://www.marketplacepulse.com/stats/amazon-net-income-112 And it looks like that recent profitability is more about AWS than their traditional core business: https://www.visualcapitalist.com/aws-powering-the-internet-a...
Is this true? > I have observed that few people understand these nuances and the significant role they play I've been out of the venture-backed world for a while, so it's an honest question. Few people understanding business basics would certainly explain a lot of recent behavior, but there are other possibilities too.
Literally every founder is capable of figuring out the basic unit economics of their business. But when VC money is abundant the unit economics don't matter because growth is the only metric worth tracking.
For example, I could imagine a founder who knew what a real business was, but just said, "In crazy times we'll do crazy things", took the VC money, and mainly shut up about the problems, while quietly trying to mitigate the risks.
Or I could imagine that the OP is literally correct here, that many never bothered to figure this stuff out because it did not matter for the short term, and in fact would interfere with them projecting an SBF-grade aura of extreme confidence.
I've certainly met people in both camps. I'm just wondering if the latter have truly become very common, or even possibly the majority in some circles.
Earlier quoted context omitted.
How so? Amazon didn't jave that many unprofitable quarters, even less years, during its history. That Amazon was never profitable because they prioritized growth is a meme made up buy various start-ups to explain their lack of profits and/or positive cash flow.
Are we looking at the same numbers? I think Amazon was basically breakeven for 20 years, from 1997 to 2017: https://www.marketplacepulse.com/stats/amazon-net-income-112 And it looks like that recent profitability is more about AWS than their traditional core business: https://www.visualcapitalist.com/aws-powering-the-internet-a...
This isn't another 2000 crash. The internet is much, much larger today. And the prize you get for being #1 in any market is enormous. It's so large that it pays to gamble with questionable growth strategies in the short term. Reasonable growth that balances LTV and CAC is nice and pragmatic but it's not a winning strategy when your competitors are putting the pedal to the metal.