Profitability is good for product quality, if you can stay afloat, but it is a choice; venture capital lets you trade profitability for growth. And once you are big, you are able to cater to enterprises with deeper pockets to pay down your debt.
The Profitable Startup
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Re: The Profitable Startup
#12I 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 jus…
You probably know answer and just hyperboling here, but there are plenty of reasons to raise as a startup. Even in pure software. Most obvious one is you’re building something actually technically challenging and need to grow your team to get there. People, especially great people, are bloody expensive. No way to afford any reasonable headcount as a 22yo first time founder without venture money. Of course, simple ide…
Maybe for something truly novel, but the exception proves the rule here IMO.
What is an example of a not simple idea pure software play that would require VC funding at the earliest stage?
Re: The Profitable Startup
#13Earlier quoted context omitted.
You probably know answer and just hyperboling here, but there are plenty of reasons to raise as a startup. Even in pure software. Most obvious one is you’re building something actually technically challenging and need to grow your team to get there. People, especially great people, are bloody expensive. No way to afford any reasonable headcount as a 22yo first time founder without venture money. Of course, simple ide…
Maybe for something truly novel, but the exception proves the rule here IMO. What is an example of a not simple idea pure software play that would require VC funding at the earliest stage?
VC funding is often required for companies that require a lot of runway prior to selling. The example that comes to mind are database companies like Mongo, dgraph, scylla etc. These require a fair amount of upfront work to create the product before their usable. A different example are industries that require a fair amount of compliance like healthcare, banking etc
Re: The Profitable Startup
#14While I love companies that become profitable early and grow at a rate that allows them to continue being profitable ... it becomes an issue with investors.
Linear has raised over $50M+ (at $400MM valuation)
You just can't grow fast enough while being profitable - to grow into & surpass that kind of valuation ... in a timeframe ok that's for your investors.
https://tracxn.com/d/companies/linear/__xC97n-jdX7VZjDBpNyRf...
Re: The Profitable Startup
#15While I love companies that become profitable early and grow at a rate that allows them to continue being profitable ... it becomes an issue with investors. Linear has raised over $50M+ (at $400MM valuation) You just can't grow fast enough while being profitable - to grow into & surpass that kind of valuation ... in a timeframe ok that's for your investors. https://tracxn.com/d/companies/linear/__xC97n-jdX7VZjDBpNyRf…
It is great for founders, and not so nice for VC investors, and Karri seems comically oblivious to that fact.
Re: The Profitable Startup
#16I 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 lipst…
The fact is, that for VC's it makes perfect sense to push for growth as much as possible. For every one of their portfolio startups. That doesn't necessarily make sense for the founders, who likely might prefer lower risk and profits instead.
VC's don't care about mediocre successes. They want couple of huge exits, and if the rest go bankrupt, they don't give a shit. That's the VC business model and all the great company-building "advice" they give, is actually just crafted to generate profits to them, not really to make sense for the founders or other stakeholders.
Re: The Profitable Startup
#17While I love companies that become profitable early and grow at a rate that allows them to continue being profitable ... it becomes an issue with investors. Linear has raised over $50M+ (at $400MM valuation) You just can't grow fast enough while being profitable - to grow into & surpass that kind of valuation ... in a timeframe ok that's for your investors. https://tracxn.com/d/companies/linear/__xC97n-jdX7VZjDBpNyRf…
Wow.. really changes my perspective on this article to find out that Linear has raised 50M+
Thanks for this source
Re: The Profitable Startup
#18A great piece of advice from Linear. Even in this flourishing AI landscape, every startup should avoid being overly speculative about resource mgmt. Linear raised from YC and Sequoia though. I'd love to learn more about how they balanced their burn rate
Re: The Profitable Startup
#19Alot of startups arent profitable because they are ran by people that have prestigious pedigrees, but dont know what theyre doing/have no experience. So they blow all kinds of money on bad ideas/poor execution, but are still able to raise more funding.
Eventually for some of these companies something clicks, and they do get to something of a valuable company.
This is what ZIRP was.
Alot of people dont know that investors are okay with this, they have 20 Million to push into a company, and figure that something might pop out.
Re: The Profitable Startup
#20Alot of startups arent profitable because they are ran by people that have prestigious pedigrees, but dont know what theyre doing/have no experience. So they blow all kinds of money on bad ideas/poor execution, but are still able to raise more funding. Eventually for some of these companies something clicks, and they do get to something of a valuable company. This is what ZIRP was. Alot of people dont know that inves…
It's bigger and wider than that. Throughout the 1990s people didn't care what anything cost on the web because they figured the money would work out someday. There was the 2000s crash but the success of Amazon, Google and such proved that the web was a great idea.
The story of social media was that there was a narrow time window and a single place (other than, recently, China) where investors were willing to take a chance that the likes of Facebook and Twitter would find a funding model. By the time that model was proven, it was too late for new entrants. Thus Europe was left high and dry.