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This goes under the name of "Unit Economics" and is reasonable for small startups to use. That's fine. But I think the meat of the article is that there are st

This goes under the name of "Unit Economics" and is reasonable for small startups to use. That's fine. But I think the meat of the article is that there are startups/businesses out there that are using so much smoke and mirrors with financial reporting that it has become a ridiculous process to read a "we are profitable!" press release. I get it - there is an arms race out there to get funding for the "next big thing" which will require hundreds of millions of dollars to get off the ground. But whatever happened to a sound business plan, an experienced team, and a sound business idea? And the "next big thing" is now so saturated by so many players that the arms race seems to be exponentially increased for any possible idea that might have some traction. It is a race to the bottom. Facebook and Google are such outliers that VC has resorted to throwing cash at the next 1,000 Mark Zuckerbergs, which only one or two probably exist in the next 10 years. Capital is chasing returns that are not sustainable.

bsder 10y ago
> But whatever happened to a sound business plan, an experienced team, and a sound business idea? VC's won't fund that.
eecsninja 10y ago
Well put. That is one of the fundamental problems with the economy of the current tech startup boom. There is too much of a winner-take-all dynamic. From the VC's perspective, it doesn't matter whether the portfolio is 10 or 1000 companies, as long as you get that home run. But to each individual founder, it's the difference between a 1/10 and 1/1000 shot at success. Staying at Facebook/Google/etc seems to be the way to go these days...
- mathattack 10y ago
  The other alternative is to come up with an idea that doesn't require scale, that can become cashflow positive more quickly. You can do this in software by attacking a very narrow niche, or by doing a services-heavy business. Neither creates a unicorn, but both can be stable.
  - eecsninja 10y ago
    Yes but good luck competing with the big VC funded companies for publicity!
AndrewKemendo 10y ago
But whatever happened to a sound business plan, an experienced team, and a sound business idea? Those exist, and they are all over the place. Ostensibly most quality startups have those things too. The majority never make big headlines - and as far as I know never really have. They generally just chug along and comprise the majority of "small businesses." Facebook and Google are such outliers that VC has resorted to throwing cash at the next 1,000 Mark Zuckerbergs, which only one or two probably exist in the next 10 years. Right, well that's the whole thesis of Venture Capital. I'm not seeing the problem really.
mathattack 10y ago
But whatever happened to a sound business plan, an experienced team, and a sound business idea? If most of the risk has been taken away, then you don't need high-risk venture capital. In many cases, the business idea only seems Sound in hindsight. Google == "Yet another search engine with a crazy valuation run by two very arrogant prima donnas" AirBnB == "Some crazy idea contingent on strangers opening their houses to each other." Capital is chasing returns that are not sustainable. If this is the case, then people will lose the capital. That's the price of a free market, and the occasional Zuckerberg returns.

bsder 10y ago

> But whatever happened to a sound business plan, an experienced team, and a sound business idea? VC's won't fund that.

eecsninja 10y ago

Well put. That is one of the fundamental problems with the economy of the current tech startup boom. There is too much of a winner-take-all dynamic. From the VC's perspective, it doesn't matter whether the portfolio is 10 or 1000 companies, as long as you get that home run. But to each individual founder, it's the difference between a 1/10 and 1/1000 shot at success. Staying at Facebook/Google/etc seems to be the way to go these days...

mathattack 10y ago
The other alternative is to come up with an idea that doesn't require scale, that can become cashflow positive more quickly. You can do this in software by attacking a very narrow niche, or by doing a services-heavy business. Neither creates a unicorn, but both can be stable.
- eecsninja 10y ago
  Yes but good luck competing with the big VC funded companies for publicity!

AndrewKemendo 10y ago

But whatever happened to a sound business plan, an experienced team, and a sound business idea? Those exist, and they are all over the place. Ostensibly most quality startups have those things too. The majority never make big headlines - and as far as I know never really have. They generally just chug along and comprise the majority of "small businesses." Facebook and Google are such outliers that VC has resorted to throwing cash at the next 1,000 Mark Zuckerbergs, which only one or two probably exist in the next 10 years. Right, well that's the whole thesis of Venture Capital. I'm not seeing the problem really.

mathattack 10y ago

But whatever happened to a sound business plan, an experienced team, and a sound business idea? If most of the risk has been taken away, then you don't need high-risk venture capital. In many cases, the business idea only seems Sound in hindsight. Google == "Yet another search engine with a crazy valuation run by two very arrogant prima donnas" AirBnB == "Some crazy idea contingent on strangers opening their houses to each other." Capital is chasing returns that are not sustainable. If this is the case, then people will lose the capital. That's the price of a free market, and the occasional Zuckerberg returns.