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Quote #1 - "They should focus on using capital as a way to take really big bets on things that seem totally audacious." Quote #2 - "Operating expenses and burn

by crabasa 10y ago

Quote #1 - "They should focus on using capital as a way to take really big bets on things that seem totally audacious." Quote #2 - "Operating expenses and burn rates will come way down, and companies that didn't worry about profitability or unit economics will." I'd love to hear how you square those two incompatible desires that the "smart money" have.

adventured 10y ago
Don't have the same expectations for each company, depending on its unique opportunities. Obviously exceptionally few companies will end up the size of Amazon, Google, Facebook, etc. There is no scenario under which most companies need to bleed red ink to the tune of hundreds of millions in capital. Most companies also will never need to make audacious bets with hundreds of millions in capital, there's no outcome scenario for them in which that makes sense. If you happen to find a potential monster company, you don't worry so much about whether they're burning $40m+ per quarter - they get a larger reprieve than everyone else (Tesla is being given that exception in the public markets today for example; much like in the Amazon / Bezos case, investors want Musk to bet big and they buy into the long-term story).
maxander 10y ago
I think you find these incompatible simply due to the Valley's own particular brand of "audacity." What #2 predicts the end of are build-fast-and-break-things concept-startups that throw tons of energy, developer-wages, and hype into their product, for indefinite periods of time and with umpteen pivots, with no notion of what their eventual business model will be. "We'll figure out money later" has become a startup trope, and while its worked out for several big names (Facebook, Twitter, etc.) its not exactly a good idea. There are other kinds of audacity, though! Elon Musk has his picture in the dictionary next to "audacious," but likely could have told you on day one how he hoped Tesla would wind up making money, and how he thought he could get there. And by all accounts he's running a tight ship- employees aren't treated lavishly, money isn't being spent where its not needed- all very standard, non-audacious stuff on the business side. Much of this is of course that Tesla is making cars, not webpages or apps, and the latter categories are much more forgiving in terms of things like unit economics[1]. I think the point is, though, that investors are no longer going to be so happy about founders taking such flagrant advantage of that forgivingness. [1] What even is a "unit of sale" for something like Facebook? An ad display? Does anyone calculate exactly what operating Facebook costs on a per-ad basis?

by crabasa 10y ago

adventured 10y ago

Don't have the same expectations for each company, depending on its unique opportunities. Obviously exceptionally few companies will end up the size of Amazon, Google, Facebook, etc. There is no scenario under which most companies need to bleed red ink to the tune of hundreds of millions in capital. Most companies also will never need to make audacious bets with hundreds of millions in capital, there's no outcome scenario for them in which that makes sense. If you happen to find a potential monster company, you don't worry so much about whether they're burning $40m+ per quarter - they get a larger reprieve than everyone else (Tesla is being given that exception in the public markets today for example; much like in the Amazon / Bezos case, investors want Musk to bet big and they buy into the long-term story).

maxander 10y ago

I think you find these incompatible simply due to the Valley's own particular brand of "audacity." What #2 predicts the end of are build-fast-and-break-things concept-startups that throw tons of energy, developer-wages, and hype into their product, for indefinite periods of time and with umpteen pivots, with no notion of what their eventual business model will be. "We'll figure out money later" has become a startup trope, and while its worked out for several big names (Facebook, Twitter, etc.) its not exactly a good idea. There are other kinds of audacity, though! Elon Musk has his picture in the dictionary next to "audacious," but likely could have told you on day one how he hoped Tesla would wind up making money, and how he thought he could get there. And by all accounts he's running a tight ship- employees aren't treated lavishly, money isn't being spent where its not needed- all very standard, non-audacious stuff on the business side. Much of this is of course that Tesla is making cars, not webpages or apps, and the latter categories are much more forgiving in terms of things like unit economics[1]. I think the point is, though, that investors are no longer going to be so happy about founders taking such flagrant advantage of that forgivingness. [1] What even is a "unit of sale" for something like Facebook? An ad display? Does anyone calculate exactly what operating Facebook costs on a per-ad basis?