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Poll: is your startup profitable?

news.ycombinator.com

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Re: Poll: is your startup profitable?

#41

Post by benjamincburns »

olalonde wrote: post #37
benjamincburns wrote: post #35

Earlier quoted context omitted.

Isn't this a huge burden on the economy as a whole? The vast majority of businesses which follow this strategy will go out of business without ever creating more value than they consumed. A significant percentage of those will over leverage and file bankruptcy, pushing their losses off onto those who helped finance them while driving up interest rates. How does it pan out long-term for a VC to advocate for this strat…

They advocate this strategy if you (plan to) take VC money. They are probably not claiming every startup should follow this strategy.

> They advocate this strategy if you (plan to) take VC money.

I understand that for some businesses accepting VC funding means more success than you could have ultimately achieved on your own, or even success where you would have otherwise failed. But to be overly snarky and simplistic, if I wanted to put someone else's benefit ahead of my own I wouldn't have started a [for profit] business.

I say that because most businesses which follow this strategy won't just tank, they'll tank really hard [Edit: that's an assumption, of course, but is this incorrect?]. I wonder if anyone is tracking the impact of this?

Is there anything that says that VCs make less by advocating strategies which promote the success of their entire portfolio? Are there VCs out there that do this?

Re: Poll: is your startup profitable?

#45

Post by benjamincburns »

SZenith wrote: post #42

Forgive me, for I am ignorant. Why do some many of you not even get revenue? Is the aim to build a userbase before monetizing the site (or flipping it)?

In my case my "startup" is a side project which doesn't cost me much to run. I started when my day job was rather soul-sucking. The day job has since improved, but I still work on the side gig from time to time.

I'd say my strategy now, if I have one, is to build in some natural virality so that I don't have to exert too much effort to attract new users. Presently if I market I'll get a good number of users for a week or so, then traffic drops back to nil. Once I get a regular user base I'll look at monetizing.

Re: Poll: is your startup profitable?

#46

Post by aclements18 »

benjamincburns wrote: post #35
Ixiaus wrote: post #30

Profit is funny for the startup scene. When first starting out building my company, my co-founder and I were often focused heavily on "profit" when talking to VC's and pitching. At a demo day we had a meeting with a partner from a big fund and pitched him. He turned us down and told us why but was kind enough to have a follow-on meeting with us to talk further about our pitching strategy and general business strategy…

Isn't this a huge burden on the economy as a whole? The vast majority of businesses which follow this strategy will go out of business without ever creating more value than they consumed. A significant percentage of those will over leverage and file bankruptcy, pushing their losses off onto those who helped finance them while driving up interest rates. How does it pan out long-term for a VC to advocate for this strat…

Your perspective is correct, but the vast majority (99%) of new businesses in the economy will never raise money from a VC (and shouldn't).

Most VC portfolios are structured such that the expectation (at least at the time of investment) is that this company will be able to make up for ALL the inevitable losses I am going to take in the other companies I invest in. Well, not really that cynical, but in reality usually one or two companies in a fund are where all the profits come from, so you can understand why investors push each company to swing for the fences.

Key takeaway for entrepreneurs is just to know when a VC is right for your business and when it's not. The key factor here is how quickly you need to scale. For example most entrepreneurs don't have the goal of a nine figure exit for their business in the next several years, but some do.

Not all VCs invest this way. Here's a good read by Greycroft Partner Ian Sigalow that walks through the economics of how they invest and why: http://www.sigalow.com/2012/01/a-new-take-on-series-a

Re: Poll: is your startup profitable?

#47

Post by tyw »

dkroy wrote: post #15
tyw wrote: post #6

yep! just quit my job and went full-time on the startup this week, too!

You might as well plug it now, I and others are probably curious about it now.

http://www.audiomack.com

Built it in our spare time early last year, went live around the end of Feb 2012. Been growing like a weed ever since, and this year it's just been too much work to keep making progress on AudioMack in addition to having a full-time job.

Never really plugged it on HN because it didn't seem like quite the right crowd and I feel awkward about shameless self-promotion. :)

Re: Poll: is your startup profitable?

#48

Post by lquist »

olalonde wrote: post #33
lquist wrote: post #23

Anybody willing to share profit ranges? We're in the $1-5M range. About 9 months old. Bootstrapped.

Wow, that's pretty amazing. B2B or B2C? SaaS? Where do your revenues come from (monthly subscription, advertising, etc.)?

B2C. Service, not product. But we don't have any recurring revenue (yet!).

Can't say much more than that unfortunately!

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