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>The artificial need for ever increasing growth and valuations is so destructive in this town, need to start rethinking some of those attitudes. We just have to

>The artificial need for ever increasing growth and valuations is so destructive in this town, need to start rethinking some of those attitudes. We just have to hit this weird fake number with no basis in reality, or people's lives get ruined. Silicon Valley is the only town I know where a thing like "profitability" is seen as a weird number. Maybe I'm missing your point, but these jobs wouldn't exist if it wasn't for endless VC capital and ridiculous valuations, so I'm not sure the net effect is leaving these former employees "worse off". >but maybe it's time for a different model. Be self-sustaining or go under; why should it be any other way?

staticautomatic 10y ago
An angel investor recently responded to my pitch materials by scolding me for saying that our unit economics were strong enough to make most of our revenue profit (which is true). He said it "wasn't smart" and that other investors would question whether I'd thought through our business model. Months later, I am still at a loss for words.
- pault 10y ago
  Maybe he was implying that it should be reinvested in growth?
  - staticautomatic 10y ago
    He claimed that costs would outstrip our margins as we grew. I have to assume he just thinks this is how startups work, because most of the costs he specifically brought up don't actually exist in our market/business model. In any event, if you have an instinctively negative and suspicious reaction to profitability, then as a business person, I want nothing to do with you.
    - rhizome 10y ago
      "Nobody ever lost a funding round for using Heroku."
      - staticautomatic 10y ago
        I don't follow. Could you explain what you meant?
        rhizome 10y ago
        It's a play on "nobody ever got fired for buying IBM," the original FUD. It relates to that person seemingly thinking that a high run rate is de rigeur. Like IBM in the 60-70s, Heroku is among the costliest providers.
luminiferous 10y ago
Just playing devil's advocate here, I think the whole venture capital/startup ecosystem is really broken. But: imagine for a second that you have a really good business model. It will be profitable beyond a certain scale. You don't have the capital on hand to grow it to that scale yourself while eating the losses. What's a guy to do? Meanwhile, some other guy has a lot of money and is always thinking about how he could be making even more money. He can bankroll you until you hit the sustainability threshold and become profitable, in return for a share of profits, or stock, or something similar. A return on investment, essentially. If you don't have a system like this, only existing big players can sink the capital into ventures like this, where they require a large scale before returning profits. And large companies are pretty risk averse in general, so that's not a great solution either. The issues is that the VC wants to see growth, since growth means you're edging closer to profitability. They'll continue to give you more and more cash if you need it, as long as you look promising. This creates the incentive for you, as the startup, to make it look like you're growing, in return for more VC cash. Regardless of actual growth numbers. Growth "hacking" is a result of the incentive structure. But the system exists because there are business models that cannot be self-sustaining from day 0 that, nonetheless, could possibly be a very good investment for a VC to make if it grows large enough.

staticautomatic 10y ago

An angel investor recently responded to my pitch materials by scolding me for saying that our unit economics were strong enough to make most of our revenue profit (which is true). He said it "wasn't smart" and that other investors would question whether I'd thought through our business model. Months later, I am still at a loss for words.

pault 10y ago
Maybe he was implying that it should be reinvested in growth?
- staticautomatic 10y ago
  He claimed that costs would outstrip our margins as we grew. I have to assume he just thinks this is how startups work, because most of the costs he specifically brought up don't actually exist in our market/business model. In any event, if you have an instinctively negative and suspicious reaction to profitability, then as a business person, I want nothing to do with you.
  - rhizome 10y ago
    "Nobody ever lost a funding round for using Heroku."
    - staticautomatic 10y ago
      I don't follow. Could you explain what you meant?
      - rhizome 10y ago
        It's a play on "nobody ever got fired for buying IBM," the original FUD. It relates to that person seemingly thinking that a high run rate is de rigeur. Like IBM in the 60-70s, Heroku is among the costliest providers.

luminiferous 10y ago

Just playing devil's advocate here, I think the whole venture capital/startup ecosystem is really broken. But: imagine for a second that you have a really good business model. It will be profitable beyond a certain scale. You don't have the capital on hand to grow it to that scale yourself while eating the losses. What's a guy to do? Meanwhile, some other guy has a lot of money and is always thinking about how he could be making even more money. He can bankroll you until you hit the sustainability threshold and become profitable, in return for a share of profits, or stock, or something similar. A return on investment, essentially. If you don't have a system like this, only existing big players can sink the capital into ventures like this, where they require a large scale before returning profits. And large companies are pretty risk averse in general, so that's not a great solution either. The issues is that the VC wants to see growth, since growth means you're edging closer to profitability. They'll continue to give you more and more cash if you need it, as long as you look promising. This creates the incentive for you, as the startup, to make it look like you're growing, in return for more VC cash. Regardless of actual growth numbers. Growth "hacking" is a result of the incentive structure. But the system exists because there are business models that cannot be self-sustaining from day 0 that, nonetheless, could possibly be a very good investment for a VC to make if it grows large enough.