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I am actively job interviewing and I have talked to a lot of startups. One of things I always ask my interviewer is whether or not the company is profitable. I

by sjroot 8y ago

I am actively job interviewing and I have talked to a lot of startups. One of things I always ask my interviewer is whether or not the company is profitable. If you get to be that large of a company (100 workers => 4% of staff => ~2500 employees) and you are not making a profit, there is something wrong. Bringing all of those people onboard seems like a waste of investor money. That said, I am a fan of Blue Apron and I do hope that their figure out a way to operate in a profitable manner soon. Edit: as replies point out, profitability isn’t a great indicator for the success of a company. While it is fair game to ask, there are other better indicators (churn and burn, existing customer base, etc) that give a better picture. My point was that I think a company at this size should be profitable or working aggressively to make that possible. I think Blue Apron is laying these people off to accomplish that.

hn_throwaway_99 8y ago
Don't think that's necessarily a really good metric in this day and age, as there are "good" kinds of unprofitability and "bad" kinds of unprofitability. Amazon was unprofitable for most of its existence until relatively recently. Most successful startups are unprofitable, and these days with the "winner take all" mentality of most VCs a company would be penalized for being profitable too early. I think a much better metric, especially for early stage companies, is their growth rate, their customer acquisition cost, and very importantly, their customer churn rate. Blue Apron's churn rate coupled with their high CAC has always been a giant flashing red flag.
- ashelmire 8y ago
  > Most successful startups are unprofitable What a bizarre world we live in where this is said seriously and everyone would agree with it. There’s a vc bubble and it’s going to pop. And we will all suffer for it.
  - hn_throwaway_99 8y ago
    Why do you think it's bizarre? It's also true. The whole reason Silicon Valley is the center of the entrepreneurial and tech universe is because it's the place that best merges technical talent with access to capital. If startups could be profitable from the get go, VCs wouldn't need to exist in the first place.
- p1necone 8y ago
  I think "good" unprofitable basically boils down to "only unprofitable because what would otherwise be profit is being immediately reinvested into growth (marketing, new employees, better third party software/hardware etc)".
  - mattnewton 8y ago
    And the bad unprofitably is usually a variation on selling dollars for .95 to try and capture a market (to charge 1.05) or build up infrastructure/scale that will eventually let you produce them for .94 cents That has to both pan out and pan out before they run out of money.
    - glhaynes 8y ago
      Not my area but I get the impression Amazon has done a lot of both of what the above two posts call "good" unprofitability and "bad" unprofitability.
- sjroot 8y ago
  I agree with most of what you’ve said. I would not consider a company with 2500 employees to be an early stage company. Blue Apron’s high churn rate was probably tied to their offering of free deliveries. That’s how I found out about it and received my first delivery. I did not continue as a subscriber after that, though.
  - hn_throwaway_99 8y ago
    I didn't use Blue Apron but I did use their direct competitor, Hello Fresh, for a while. As a software engineer I was actually extremely impressed with their app and the service overall, but at the end of the day I found out that I really don't like to cook all that much. These services occupy an incredible difficult niche: people who love to cook will just find it cheaper to buy the ingredients themselves, while lots of others folks like me are more in love with the idea of cooking, but the price ends up being about the same as fresh, healthy, pop-it-in-the-microwave options like Snap Kitchen.
    - Double_a_92 8y ago
      So wealthier, single people with some anxiety that stops them from going to a supermarket? :D
      - hn_throwaway_99 8y ago
        For that there is Uber Eats.
- bostonvaulter2 8y ago
  > "winner take all" mentality of most VCs a company would be penalized for being profitable too early This can go the other way too, I know that I've found myself being more selective in which companies products I use based on their business model and if they're look like a stable company, too many flash and burns.
pvg 8y ago
There are lots of currently very successful startups that were not at all profitable at 2500 employees. The question by itself isn't a particularly good way to gauge the health of a venture-backed startup.
- sjroot 8y ago
  Another reply mentioned unit profitability, but do you have any other specific questions you think would be better to ask?
  - deleted 8y ago
    [deleted]
  - pvg 8y ago
    At a 2k+ person company? I doubt the interviewer would know much more about the business than what you can find online. It certainly makes sense to try to figure out the health of a business you're considering taking a job at. I'm less sure your interviewer would be a great source for that kind of info, though.
sonnyblarney 8y ago
It's perfectly fine for companies to not be profitable if they are growing. A better question would be 'unit profitability' - i.e. Uber might be spending billions in new markets, but if they are effectively profitable in established cities - then it's a good sign. The question is really - is there meaningful growth, are the customers real, do they come back for more or are they dropping subs etc.. If they have truly found 'product market fit' then usually it makes sense to spend spend spend to grow and grab market share. If they are blowing money on massive acquisition costs and customers are not hanging around ... then this is a problem
matthewowen 8y ago
I often have interviewees ask this question with a tone that sounds like they think they're daring and smart for asking it... but it's really a minor question in a lot of ways. Most startups are unprofitablw: it's more important to understand how and why and what the path to profitability is. And, frankly, the most meaningful answers there are going to happen in the sell phase, not from random engineers interviewing you. If I'm perfectly honest, when asked that question it tends to make me think the interviewee just isn't well versed with startups.
- sjroot 8y ago
  > it's more important to understand how and why and what the path to profitability is. I think that is a much better way of looking at it. Thanks.

by sjroot 8y ago

hn_throwaway_99 8y ago

Don't think that's necessarily a really good metric in this day and age, as there are "good" kinds of unprofitability and "bad" kinds of unprofitability. Amazon was unprofitable for most of its existence until relatively recently. Most successful startups are unprofitable, and these days with the "winner take all" mentality of most VCs a company would be penalized for being profitable too early. I think a much better metric, especially for early stage companies, is their growth rate, their customer acquisition cost, and very importantly, their customer churn rate. Blue Apron's churn rate coupled with their high CAC has always been a giant flashing red flag.

ashelmire 8y ago
> Most successful startups are unprofitable What a bizarre world we live in where this is said seriously and everyone would agree with it. There’s a vc bubble and it’s going to pop. And we will all suffer for it.
- hn_throwaway_99 8y ago
  Why do you think it's bizarre? It's also true. The whole reason Silicon Valley is the center of the entrepreneurial and tech universe is because it's the place that best merges technical talent with access to capital. If startups could be profitable from the get go, VCs wouldn't need to exist in the first place.
p1necone 8y ago
I think "good" unprofitable basically boils down to "only unprofitable because what would otherwise be profit is being immediately reinvested into growth (marketing, new employees, better third party software/hardware etc)".
- mattnewton 8y ago
  And the bad unprofitably is usually a variation on selling dollars for .95 to try and capture a market (to charge 1.05) or build up infrastructure/scale that will eventually let you produce them for .94 cents That has to both pan out and pan out before they run out of money.
  - glhaynes 8y ago
    Not my area but I get the impression Amazon has done a lot of both of what the above two posts call "good" unprofitability and "bad" unprofitability.
sjroot 8y ago
I agree with most of what you’ve said. I would not consider a company with 2500 employees to be an early stage company. Blue Apron’s high churn rate was probably tied to their offering of free deliveries. That’s how I found out about it and received my first delivery. I did not continue as a subscriber after that, though.
- hn_throwaway_99 8y ago
  I didn't use Blue Apron but I did use their direct competitor, Hello Fresh, for a while. As a software engineer I was actually extremely impressed with their app and the service overall, but at the end of the day I found out that I really don't like to cook all that much. These services occupy an incredible difficult niche: people who love to cook will just find it cheaper to buy the ingredients themselves, while lots of others folks like me are more in love with the idea of cooking, but the price ends up being about the same as fresh, healthy, pop-it-in-the-microwave options like Snap Kitchen.
  - Double_a_92 8y ago
    So wealthier, single people with some anxiety that stops them from going to a supermarket? :D
    - hn_throwaway_99 8y ago
      For that there is Uber Eats.
bostonvaulter2 8y ago
> "winner take all" mentality of most VCs a company would be penalized for being profitable too early This can go the other way too, I know that I've found myself being more selective in which companies products I use based on their business model and if they're look like a stable company, too many flash and burns.

pvg 8y ago

There are lots of currently very successful startups that were not at all profitable at 2500 employees. The question by itself isn't a particularly good way to gauge the health of a venture-backed startup.

sjroot 8y ago
Another reply mentioned unit profitability, but do you have any other specific questions you think would be better to ask?
- deleted 8y ago
  [deleted]
- pvg 8y ago
  At a 2k+ person company? I doubt the interviewer would know much more about the business than what you can find online. It certainly makes sense to try to figure out the health of a business you're considering taking a job at. I'm less sure your interviewer would be a great source for that kind of info, though.

sonnyblarney 8y ago

It's perfectly fine for companies to not be profitable if they are growing. A better question would be 'unit profitability' - i.e. Uber might be spending billions in new markets, but if they are effectively profitable in established cities - then it's a good sign. The question is really - is there meaningful growth, are the customers real, do they come back for more or are they dropping subs etc.. If they have truly found 'product market fit' then usually it makes sense to spend spend spend to grow and grab market share. If they are blowing money on massive acquisition costs and customers are not hanging around ... then this is a problem

matthewowen 8y ago

I often have interviewees ask this question with a tone that sounds like they think they're daring and smart for asking it... but it's really a minor question in a lot of ways. Most startups are unprofitablw: it's more important to understand how and why and what the path to profitability is. And, frankly, the most meaningful answers there are going to happen in the sell phase, not from random engineers interviewing you. If I'm perfectly honest, when asked that question it tends to make me think the interviewee just isn't well versed with startups.

sjroot 8y ago
> it's more important to understand how and why and what the path to profitability is. I think that is a much better way of looking at it. Thanks.