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Revenue is easy, profit is harder

edge.ceo

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Re: Revenue is easy, profit is harder

#91

Post by fxtentacle »

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…

In some cases, your goal as an investor is not to hold on to the investment until it becomes a viable company and IPOs. Instead, you just try to sell your shares to the next person as quick as possible.

If you're in the latter situation, then hype is way more important than actual fundamentals.

Re: Revenue is easy, profit is harder

#92

Post by dopeboy »

lchengify wrote: post #80
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…

When investing in different industries (construction vs tech), it's often useful to think about them in the context of asset classes. Specifically, construction is more tied to either real estate, hospitality or government contracts. These often raise money via a bond (debt) offering or an equity with a very well-worn finance model. These projects require a lot of upfront capital (billions not unusual for roads) and…

This is a helpful reply. Any further literature (blogs or books) that you'd recommend to learn about these concepts?

Re: Revenue is easy, profit is harder

#93

Post by kolbe »

gizmo wrote: post #11

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.

"the prize you get for being #1 in any market is enormous"

I believe this for broad markets with network effects (though see how quickly tiktok obviated facebook), but for companies that send out text messages to your customers or host your application in the cloud, which are examples of the creme de la creme of 10s startup success, it matters a lot less. These companies have no moat, no future, and are purely designed to be vehicles that take money out of the pockets of pension funds and give it to financiers.

Re: Revenue is easy, profit is harder

#94

Post by kmonsen »

ivan_gammel wrote: post #61
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…

Let’s say you distribute X million € to X startups (each one gets 1M) and you know that on average one of them will yield 2X in 5 years and the rest will just burn the money and die. This seems to be a good investment, right? You only need to pick those startups carefully. It appears, the criteria of selection may be quite different from what you would look at if you were to provide those money as a loan. I’m not sur…

No the unicorn needs to do a lot better than 2x. I think you need an X and a Y there for it to make sense.

Re: Revenue is easy, profit is harder

#95

Post by lchengify »

dopeboy wrote: post #92
lchengify wrote: post #80

Earlier quoted context omitted.

When investing in different industries (construction vs tech), it's often useful to think about them in the context of asset classes. Specifically, construction is more tied to either real estate, hospitality or government contracts. These often raise money via a bond (debt) offering or an equity with a very well-worn finance model. These projects require a lot of upfront capital (billions not unusual for roads) and…

This is a helpful reply. Any further literature (blogs or books) that you'd recommend to learn about these concepts?

Unfortunately, I picked most of this up from school (shout out to Babin's Engineering Entrepreneurship class @ Penn) and from my stepmother who is a capital markets attorney.

However the two finance podcasts I follow really closely are "Odd Lots" from Bloomberg [1] and "The Compound and Friends" from Josh Brown and Michael Batnick. Both take a more broader look at the economy than just venture capital, and are super smart folks. Also honestly, they're fun to listen to which makes it easier.

[1] https://www.youtube.com/c/TheCompoundRWM

[2] https://www.bloomberg.com/oddlots-podcast

Re: Revenue is easy, profit is harder

#96

Post by tnel77 »

petemc_ wrote: post #47
birdyrooster wrote: post #32

Earlier quoted context omitted.

Interesting to think that the company which he divested from may have made it because of his exit.

Unless you have some information you're not sharing, this is a pretty horrible thing to say.

I don’t feel like it’s horrible. If one of your founding members is focused on getting rich quick while the rest are trying to invest in the company long-term, then his departure very well could have helped the company ultimately succeed.

Re: Revenue is easy, profit is harder

#97

Post by quickthrower2 »

threeseed wrote: post #84
kristianc wrote: post #58

Earlier quoted context omitted.

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.

Can you provide examples. Pre-revenue NFT startup raising $25m pre-seed in this market ?

It is a funny concept because with NFT they are selling the Brooklyn Bridge over and over again - there is no excuse to be pre revenue!

Re: Revenue is easy, profit is harder

#98

Post by kgwgk »

gizmo wrote: post #16
wpietri wrote: post #13

Earlier quoted context omitted.

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...

Yes, but how do you get to breakeven? By reinvesting all your profits. High capex and no taxes because you don't have any income. And you can still raise money by issuing stock, which goes up in line with your FCF. You maximize growth at 0 profit and this also maximizes shareholder value.

> High capex and no taxes because you don't have any income. And you can still raise money by issuing stock, which goes up in line with your FCF.

With high capex your free cash flow will be even lower than your net income.

Re: Revenue is easy, profit is harder

#99

Post by [deleted] »

gen220 wrote: post #81
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…

There's an angle to consider – why is it that people who are technically skilled and financially experienced do not take on venture funding and build billion dollar plus companies? [1] Perhaps, they know (from business experience) that the VC treadmill is not in their best interests, when everything about that life is considered! :) Perhaps investors actually benefit from the naïvete (read: not incompetence, just naï…

[deleted]

Re: Revenue is easy, profit is harder

#100

Post by 13415 »

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…

Most innovation of internet and computer-related business come from Silicon Valley, so it seems reasonably clear to me that investors there are doing the right thing. To be honest, I find it hard to name any highly successful EU companies whose main business is internet-based or software-related, at least not in the b2c sector. There are some, but the major players seem to come from the US and more recently also from China.

I've always considered the risk-averse investment culture and bureaucracy in Europe to be a major factor.

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