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It's refreshing to see a tech company IPO that isn't VC backed and actually can sustain itself with its profits. Maybe I'm just naive but I find it strange how
by rifung 11y ago
It's refreshing to see a tech company IPO that isn't VC backed and actually can sustain itself with its profits.
Maybe I'm just naive but I find it strange how so many companies focus so long on acquiring users and not on making money, thus forcing them to continue to get outside funding. For something like Facebook I can understand how this makes sense, but it seems as though this strategy is currently the norm rather than the exception.
- leereeves 11y agoVC backed companies are focused on capturing a market as quickly as possible. A free or below cost product helps with that goal, as does having a lot more money than bootstrapping could provide. If you think of a VC as a conglomerate, startups are money losing R&D and market research divisions, searching for the next goose that lays golden eggs.
- celticninja 11y agoBuy it does seem that transitioning from a free to a paid for service is a tripping point for many of these VC backed startups. Of course by the time this happens it has usually gone through an IPO, the early investors have made a nice profit, the shareholders start requesting a return, the company has difficulties monetising and the shareholders eat a write down. But the VC makes out OK.
- billmalarky 11y agoYou may enjoy this article from venture capitalist Fred Wilson. http://avc.com/2015/10/negative-gross-margins/ http://avc.com/2015/10/negative-gross-margins/
- xenadu02 11y agoFull disclosure: I'm on the iOS team at PlanGrid. We're a YC-12, VC-backed company. We were profitable within a year of the seed round. We still have the bulk of our Series A in the bank but went ahead and raised a $40 million Series B because terms were extremely good (low dilution plus we can ride out any downturn). I suspect some of these high valuations are simply investors paying a premium to buy in, not an expectation that the company is or isn't worth that much. When I walk around SF with my PlanGrid shirt on it isn't other people in tech that say hello or know who I am... it's the guys working at construction sites. People in hard-hats and boots who tell us our software has changed their lives. The tech press and insular SV community obsesses about the ultra-unicorns. Some of us are just busy quietly solving people's needs (usually in industries that have been long-ignored by SV/tech) and we're doing quite well for it. There may be a bubble but if you build something that provides real, immediate value to customers then the rest of it is just noise.
- bardworx 11y agoJust checked out your site and I have two things to say: 1 - this is getting forwarded to our construction manager. This should help them tremendously. 2 - I got a bit of a funky layout on 6+ (safari). Not sure if it's me or not but a heads up, regardless. Thank you sir. [edit] sent screenshot from phone via support email [didn't want to reply and hijack thread]
- MAGZine 11y agoAnother PlanGridder—we're really proud of our product and really appreciate your support--so thanks :) people find our product really helpful, hopefully your construction manager + team will, too! could you send along a pic of the funky layout?
- deleted 11y ago[deleted]
- semi-extrinsic 11y agoI see PlanGrid is aimed squarely at professional constructors. Is there any benefit in using it for small, private projects, or is it too "enterprisey"? Say you're building e.g. a garage. And can you ELI5 what "free for 50 sheets" means?
- nightpool 11y agoI don't think so? All I know about plangrid is from their landing page, but it seems like it'd be like using e.g. JIRA or Gerrit for a single-person project. i.e. it wouldn't provide any additional value
- semi-extrinsic 11y agoYeah, I'm unsure, that's why I ask. Some of the features (version control, progress pictures, fast rendering on mobile devices) definitely seem useful even for a single-person project.
- balls187 11y agoI'm by no means a savvy investor, nor an expert in this, and am probably stating the obvious but the rationale is Active Users have a value, even if they're not actively providing revenue. Previously, it was simply monetizing that audience via Ads. More recently it's monetizing the data that those users generate. There is also value gaining a particular segment, such as Activison-Blizzard purchasing King gaining access to all the casual mobile gamers. Essentially, its that those users could be used to generate money, and thus are valuable.
- gammarator 11y agoThe counterargument is that nobody knows how much value they will have--and sometimes people are too optimistic. See "Investor Storytime" here: http://idlewords.com/talks/internet_with_a_human_face.htm http://idlewords.com/talks/internet_with_a_human_face.htm
- balls187 11y agoTherein lies the risk / reward for investing in a startup that isn't generating profit.
- joshdick 11y agoAccording to Crunchbase, Atlassian has raised $210M in funding in two rounds. https://www.crunchbase.com/organization/atlassian#/entity https://www.crunchbase.com/organization/atlassian#/entity
- smeyer 11y agoLooks like you missed part of the article: >Atlassian was founded in 2002, but it hasn't taken any outside investment. The last two funding rounds from Accel and T. Rowe Price were done to let employees sell some of their shares, and Atlassian says the cash wasn't used for operations.
- jsankey 11y agoBut they were bootstrapped and very profitable for several years before taking any funding.
- ghuntley 11y agoLast two rounds were for the employees. Atlassian raised rounds to allow employees to convert equity into cash, if they so desired. Housing is very expensive in Sydney. Additionally Atlassian paid the taxation bills of their employees as well. In Australia, tax is due to be paid immediately on issuance of equity instead of the fair and reasonable benchmark of upon sale/capital gains. This has since been corrected in legislation but it excludes Atlassian as there are company age (ASIC registration less than x years old) and revenue/valuation limits. See http://generalstandards.co/blog/new-esop/ http://generalstandards.co/blog/new-esop/ for details.
- jegutman 11y agoYes it's refreshing to see, but it would be a much, much worse world if this was the only type of company. I get the cynicism towards companies that spend forever on "user acquisition" and there have been some companies that never turned a profit. But if you want to build infrastructure that has relatively high fixed costs and really low marginal costs (which by the way defines most of the software industry) there's always going to be a need for up front capital and returns to that capital. So you could claim a company is spending too much on user acquisition, but another way of framing it is financing their fixed costs and working their ass off to get to a point where they can sustain their fixed costs from the variable costs of their user base.
- Benjammer 11y agoHow does user acquisition finance fixed costs if there is no clear revenue stream yet? Are we assuming everyone is depending mostly on ad revenue?
- jegutman 11y agoI mean ad revenue is definitely one model like this. But even Dropbox, Uber, Tesla, Netflix and many others would fit under that category. Sometimes the generating revenue part itself is expensive to build, if you can't even get tons of people to use your product for free you're going to have trouble getting there (but that's a lot more for advertising-based revenue). I think a lot fewer companies have no revenue stream that you're suggesting. Sometimes very early companies haven't figured out revenue, but they also haven't figured out product. Sometimes they're closely tied together, sometimes they're not.
- propogandist 11y ago> Sometimes very early companies haven't figured out revenue, but they also haven't figured out product. Then they shouldn't be considered a business.
- jegutman 11y ago
- pbreit 11y agoI find it strange that people still don't understand that building an asset is valuable and that a growth company should grow. If you know how to turn $1 into $2 (of value) you should be spending as much money as you can.
- coryrc 11y agoBecause markets aren't infinite. I can easily turn $5 into $10; buy candy bars and sell them to my neighbors next time I watch a sports game in person. So I'm really confident I could double $5. But could I double $50? I'll definitely get caught trying to sell $500 worth. So I just sell a little more all the time while remaining cash flow positive, and that's how I learn the limits of the market without going bust.
- sib 11y agoSo you pretty much just described the plot of Breaking Bad ;)
- pbreit 11y agoOh, c'mon. You do it for as long as you can.
- jzwinck 11y agoWhat you're describing is often called "capacity." I found this to be an accessible primer: http://qwafafew.org/images/uploads/san_francisco/sf-20041018-vangelisti.pdf http://qwafafew.org/images/uploads/san_francisco/sf-20041018...