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>“In tech, when times are good, it’s about potential. When they aren’t, investors focus much more on fundamentals.” That second part... why that isn't ALWAYS t

>“In tech, when times are good, it’s about potential. When they aren’t, investors focus much more on fundamentals.” That second part... why that isn't ALWAYS the focus is beyond me. Edit: Adding a clarifying statement as my point wasn't specific enough. I'm very aware that early stage investments are VERY speculative, but when we're talking about a company moving into 1BN+ valuation territory, fundamentals should be in focus.

rhc2104 11y ago
As a counterexample, Google didn't show ads until 2000. http://googlepress.blogspot.com/2000/10/google-launches-self-service.html http://googlepress.blogspot.com/2000/10/google-launches-self...
- dkarapetyan 11y ago
  But the fundamentals were not ads. It was solid search. That's what delivered value to users and why they kept coming back.
  - jessedhillon 11y ago
    you are confusing business and technology fundamentals. Business fundamentals -- bottom-line numbers on the P&L statement -- are not furthered by increasing the number of active users alone, or by delighting users. Only ad revenue would increase the fundamentals being discussed here.
    - dkarapetyan 11y ago
      I disagree with the overall sentiment. Doing the right thing technology-wise and delighting users is what made google possible. Technology fundamentals != business fundamentals but the pre-not-bubble-but-maybe-bubble market did not have either one. Many companies were pure buzz with neither business nor technology figured out.
      - jessedhillon 11y ago
        Then you're basically arguing semantics while agreeing with the sentiment in question here. You're saying that startups do best when they focus on delivering value to users first, and then figuring out a path to profit that preserves the first value. Which is a strategy that investors who make big bets on potential would also promote.
dkarapetyan 11y ago
Because that requires everyone involved to understand what the fundamentals are. Half the time investors just go wherever there is the most noise and buzzwords.
johnrob 11y ago
It's the difference between a sellers' and buyers' market (boom vs bust). To get a low entry point during a boom, you have to invest before there's hard evidence of success. Kind of like how a race car needs to turn before corner entry in order to avoid going too wide.
stellar678 11y ago
I figure it's baked into the name Venture Capital. A venture is about potential rather than fundamentals. The question for any particular venture is when fundamentals become a more important metric than potential.
jessedhillon 11y ago
Why does this simplistic analysis permeate HN, of all places? There are certain technologies and trends whose full potential is not presently obvious, or realizable, and the ability to exercise that potential could be capped or cut short if investors force a near-term focus on profits. It's the same reason why we ideally teach children any number of skills which have no direct application to their future vocations. Future options are sometimes more desirable than current profits.

rhc2104 11y ago

As a counterexample, Google didn't show ads until 2000. http://googlepress.blogspot.com/2000/10/google-launches-self-service.html http://googlepress.blogspot.com/2000/10/google-launches-self...

dkarapetyan 11y ago
But the fundamentals were not ads. It was solid search. That's what delivered value to users and why they kept coming back.
- jessedhillon 11y ago
  you are confusing business and technology fundamentals. Business fundamentals -- bottom-line numbers on the P&L statement -- are not furthered by increasing the number of active users alone, or by delighting users. Only ad revenue would increase the fundamentals being discussed here.
  - dkarapetyan 11y ago
    I disagree with the overall sentiment. Doing the right thing technology-wise and delighting users is what made google possible. Technology fundamentals != business fundamentals but the pre-not-bubble-but-maybe-bubble market did not have either one. Many companies were pure buzz with neither business nor technology figured out.
    - jessedhillon 11y ago
      Then you're basically arguing semantics while agreeing with the sentiment in question here. You're saying that startups do best when they focus on delivering value to users first, and then figuring out a path to profit that preserves the first value. Which is a strategy that investors who make big bets on potential would also promote.

dkarapetyan 11y ago

Because that requires everyone involved to understand what the fundamentals are. Half the time investors just go wherever there is the most noise and buzzwords.

johnrob 11y ago

It's the difference between a sellers' and buyers' market (boom vs bust). To get a low entry point during a boom, you have to invest before there's hard evidence of success. Kind of like how a race car needs to turn before corner entry in order to avoid going too wide.

stellar678 11y ago

I figure it's baked into the name Venture Capital. A venture is about potential rather than fundamentals. The question for any particular venture is when fundamentals become a more important metric than potential.

jessedhillon 11y ago

Why does this simplistic analysis permeate HN, of all places? There are certain technologies and trends whose full potential is not presently obvious, or realizable, and the ability to exercise that potential could be capped or cut short if investors force a near-term focus on profits. It's the same reason why we ideally teach children any number of skills which have no direct application to their future vocations. Future options are sometimes more desirable than current profits.