They don't. Or at least once a company is public they don't. At a very high level, one of the arbitrary ways to divide up stocks is into growth stocks, value s

They don't. Or at least once a company is public they don't. At a very high level, one of the arbitrary ways to divide up stocks is into growth stocks, value stocks, and income stocks. You can google those terms if you want a deeper level of understanding i provide, since those are the terms of art used in financial circles. Growth stocks are stocks for companies that you/investors feel will continue to see increasing profits/revenues/earnings compared to the market. Value stocks are companies that you/investors feel will are undervalued compared to their fundamentals. Income stocks are companies that you/investors take for the dividend payments. Continuing at a super high level (ie these are still generalities with examples to the contrary), growth stocks have higher price to earnings ratios and are valued primarily based on capital appreciation ("i think this stock's price is undervalued compared to its actual value"), which very much depends on how successful someone thinks a company will be, whereas value stocks have low price to earnings ratios and are valued primarily based on expected dividends payments (sidenote: one way for determining the value of a stock is to take the limit of the sum of all expected dividends from now until infinity). Income stocks aren't priced incorrectly the way the other two are and tend to match what investors expect the dividend payments to be (sidenote: all stocks can/do pay dividends, but that's generally not what drives the purchase of value/growth stocks). Tech companies are almost all growth stocks. People buy them on the expectation that they will execute better than the rest of their competitors and that this will result in a large growth in revenue. Profitability doesn't really matter that much here as long as they have enough money to keep operating, because the expectation is that profitability will come later after revenue increases. Once the company thinks that a business unit has saturated the market to the point where it can no longer grow revenue beyond the average rate of the market, it will transition to an income stock by focusing on cutting costs and trying to increase profitability as much as possible (since a priori revenue can't really increase in relation to the market). If a company wants to remain a growth stock it needs to 1) successfully transition business units from growth to income without losing too much revenue (and simultaneously becoming profitable based on expected revenue levels, ie driving down expenses below revenue), and 2) identify new emerging markets where they can create a new business unit that can drive growth. If you do this right, you can fund 2 with 1 and remain a growth stock indefinitely. If you do this wrong, then investors will get angry and force you to pay higher dividends and sell off or shut down the growth parts of your business. Growth stocks have advantages for (tech) companies due to the focus not being on profitability: Paying employees with RSUs (no one really does options anymore if they're public, but sure, options, too) is attractive to employees because the stock is expected to increase in value and RSUs/options are allocated in constant amounts of stock, not constant amounts of dollars (at an income stock company, stocks aren't as attractive as cold hard cash to employees, because of all the hassle of turning them into cash for essentially no gain, and this lowers profitability for the company compared to paying straight cash due to the way accounting works). Companies can lavish nonstandard and standard benefits on employees to attract top talent without investors batting much of an eye (at an income company it's much tougher to justify super great benefits due to the focus on profitability (why pay a top-tier person if a middle tier-person costs less than revenue loss associated with not going with the best). After a company is public it's not so much VCs as it it the stockholders in general (of which the VCs are usually still a substantial member). But in general, they'd both say the same thing: either increase revenue substantially (preferred) or gracefully transition to income stock (less preferred). VCs will hang onto the stock as long as they think that it's a good investment for their fund (i don't know when this means they sell it, but it's not necessarily immediately after IPO). Companies get in trouble when they are having trouble growing revenue. Investors will quickly push for them to transition to an income stock if they lose confidence in the company's ability to continue to grow. This is because in order for the stock price to not drop revenue has to keep increasing or the company has to become profitable enough to justify its stock price when considered as an income stock. Twitter wants to remain a growth stock, but investors want to see increasing revenue for that. Since twitter can't do that, it's got to focus on increasing profitability by cutting expenses. I left off value stocks so far. Essentially, if you fuck up the transition from growth to income stock for a business unit or you fuck up identifying new markets to grow into, your stock price will go down accordingly. If people think that this was a mistake that the company can correct and learn from, then they will see the price as undervalued compared to how they think the company will perform. This belief that the market has overreacted is what allows people to consider a certain stock a value stock.