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Revenue is easy, profit is harder

edge.ceo

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Re: Revenue is easy, profit is harder

#51

Post by jasmer »

jossclimb wrote: post #43

Pretty much. I have seen so many startups over the past few years, with A rounds up to $25 even $50 million where the CEO has zero business experience, they are literally learning by the seat of their pants.. They have gone from some experience as a tech lead for a small team, to the next day to running a large company. Obviously, there will be the odd outlier Zuckerberg type, but many of them are going to be totally…

Zuck had no idea what he was doing, and a lot of these guys don't learn some basic things until much later on, or never do.

When you have that kind of growth and that kind of money, frankly it's different anyhow - riding an explosionn is different than running a company, which is almost always 'operating'.

CEO's are captains of ships with moving parts, experts, probably already a navigator, engineer, maps, standard port-to-port model etc.. In a way CEO's of established companies are 'overseers'.

CEO's of compaanies blowing up is something different, it's not an optimization process it's usually a top-line process, and then maybe crude bottom line net-profit process while keeping enough wood in the fire.

Re: Revenue is easy, profit is harder

#52

Post by maCDzP »

So I am a Silicon Valley outsider. I live in the northern EU and work with project management in the construction industry representing the owner. It’s mostly infrastructure, roads, water. Old industry, conservative, we basically hate new things. On my spare time I tinker with my computer, learn assembly or whatever. Hence HN.

I have recently started a course in corporate finance at my local uni because my new role requires me to understand accounting, making business decision and so on.

I haven’t finished my course, and I have to admit that I skimmed the article. So what I am about to say is probably wrong. It’s a feeling I have.

I have the feeling that a lot of theses articles are pretty basic corporate finance. What I mean is that if you study and try to understand basic CF, you will gain the insights that many of these articles talk about.

When I then read in the comments that there are cases where tech leads with no business experience get millions in funding and basically are learning by doing. Silicon Valley seems to be on another planet for me. It’s sounds surreal to me.

If I was an investor I would never give that person money since projects are so extremely difficult. The wicked problem is a real thing. Or maybe I am just poor and don’t get how people with large amounts of cash think. I get that it’s a numbers game and you have a portfolio of companies, but still.

Guys that are closer to SV, I would love to hear your thoughts on my thoughts.

Re: Revenue is easy, profit is harder

#53

Post by somsak2 »

coffeebeqn wrote: post #39
ghiculescu wrote: post #20

Earlier quoted context omitted.

On the contrary, I think the internet being bigger means the prize for being #2, 3, etc is great too. Very few markets are actually winner takes all.

Also people thinking that Google and Meta won’t be looked at like Oracle and IBM in 10-20 years are probably way too confident in the status quo

Microsoft was founded before oracle and is among the top 5 largest tech co's. IBM and oracle may not be as big as they used to but they're still huge. oracle in particular is at a near all time high.

Re: Revenue is easy, profit is harder

#54

Post by smeej »

hinata08 wrote: post #14

Almost unrelated, but I also learned what was capital efficiency and payback period after playing Monopoly for the first time in years. 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 hot…

There's one monopoly that matters in Monopoly: the houses themselves.

The game only has 32 houses. If you get two 3-property monopolies and build four houses on each one, forgoing hotels, you have 24 houses and everyone else is fighting over the remaining 8. If you get max out houses on two 3-property monopolies and a 2-property one, the game is yours regardless of what anyone else has.

Re: Revenue is easy, profit is harder

#55

Post by polynox »

maCDzP wrote: post #52

So I am a Silicon Valley outsider. I live in the northern EU and work with project management in the construction industry representing the owner. It’s mostly infrastructure, roads, water. Old industry, conservative, we basically hate new things. On my spare time I tinker with my computer, learn assembly or whatever. Hence HN. I have recently started a course in corporate finance at my local uni because my new role r…

So you would refuse to fund Google (Larry and Sergei being PhD students at Stanford at the time) because they "[have] no business experience"?

Re: Revenue is easy, profit is harder

#56

Post by JumpCrisscross »

maCDzP wrote: post #52

So I am a Silicon Valley outsider. I live in the northern EU and work with project management in the construction industry representing the owner. It’s mostly infrastructure, roads, water. Old industry, conservative, we basically hate new things. On my spare time I tinker with my computer, learn assembly or whatever. Hence HN. I have recently started a course in corporate finance at my local uni because my new role r…

> a lot of theses articles are pretty basic corporate finance

One take: yes, and venture-backed companies often forget or ignore the basics of corporate finance.

Another take: orthodox corporate finance isn’t tailored for start-ups. If you’re developing a product, GAAP income is meaningless. So we bootstrap interim financial metrics, e.g. eyeballs and ARPUs and DAUs (oh my!).

In truth, the latter dominates at the early stage. But firms grow. Some founders and VCs (see: Andreessen) are late to recognise when nontraditional metrics do more harm than good. When that ignorance becomes a point of pride, the former gains explanatory power.

Re: Revenue is easy, profit is harder

#57

Post by disgruntledphd2 »

jossclimb wrote: post #43

Pretty much. I have seen so many startups over the past few years, with A rounds up to $25 even $50 million where the CEO has zero business experience, they are literally learning by the seat of their pants.. They have gone from some experience as a tech lead for a small team, to the next day to running a large company. Obviously, there will be the odd outlier Zuckerberg type, but many of them are going to be totally…

To be fair, Zuckerberg hired lots and lots of experienced people early on, and listened to them. Honestly though, if he hadn't hired Sheryl Sandberg then Facebook would probably have failed as a business.

Re: Revenue is easy, profit is harder

#58

Post by kristianc »

polynox wrote: post #55
maCDzP wrote: post #52

So I am a Silicon Valley outsider. I live in the northern EU and work with project management in the construction industry representing the owner. It’s mostly infrastructure, roads, water. Old industry, conservative, we basically hate new things. On my spare time I tinker with my computer, learn assembly or whatever. Hence HN. I have recently started a course in corporate finance at my local uni because my new role r…

So you would refuse to fund Google (Larry and Sergei being PhD students at Stanford at the time) because they "[have] no business experience"?

Google’s initial VC funding round pre-IPO was something like $25m. Even allowing for inflation you see that kind of money tossed around on pre-revenue NFT startups based on a pitch deck today.

Re: Revenue is easy, profit is harder

#59

Post by renewiltord »

maCDzP wrote: post #52

So I am a Silicon Valley outsider. I live in the northern EU and work with project management in the construction industry representing the owner. It’s mostly infrastructure, roads, water. Old industry, conservative, we basically hate new things. On my spare time I tinker with my computer, learn assembly or whatever. Hence HN. I have recently started a course in corporate finance at my local uni because my new role r…

Think of it like this. If you're a big fund you want a portfolio diversified in industry and risk.

If the guys CalPERS allocated the 0.5% (a few billion) to (the VCs) decided to also not do the risky thing then you haven't got a diversified portfolio.

The point is to put a small amount of your phenomenal wealth into risky bets with outsize returns precisely because you want to capture some of that other risk diversity.

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