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As Reid Hoffman of Greylock Partners, a venture-capital firm, and the co-author of a book about blitzscaling, puts it: “In a connected world, someone will build

As Reid Hoffman of Greylock Partners, a venture-capital firm, and the co-author of a book about blitzscaling, puts it: “In a connected world, someone will build an Amazon. The only question is who and how.” '...what they also lack, in 11 cases out of 12, are profits. Today, according to Jay Ritter of the University of Florida, 84% of companies pursuing ipos have no profits. That is remarkably high. Ten years ago, the proportion was just 33%. To see profitlessness as rampant as today’s you have to go back to the peak of the dotcom boom in 2000.' I'm in the Bay Area and this late stage of the tech business cycle reminds me a lot of the build up to the dot com bust. for Enron see Theranos (and possibly even Tesla), along with lots of mega deals over basically profitless platform companies posturing around dominance of future markets...

jypepin 8y ago
I don't disagree, but it's been 10 years that we keep hearing that "<insert something> are now showing that the dot com burst is coming again"
- z3t4 8y ago
  Bubble bursts are entirely speculative. When people think the bubble have burst or are about to burst, that's when it will burst.
romanhn 8y ago
I see the profit angle brought out often in these discussions, and as someone that has worked at one of these unicorns with a recent IPO, I'd like to point out that profitability is not a black-and-white consideration. A company has many financial dials and switches, and ours specifically could have easily been profitable if they had chosen to do so. It was a very intentional decision to funnel money towards further growth, which frankly I had/have no issues with. I suspect that is the case with many B2B unicorns; not sure the B2C ones could make a similar transition as easily if circumstances called for it. Not sure the dotcom crash is comparable - those were the days of companies getting millions without so much as a business plan, and going public months after being born. Sure, the companies without solid fundamentals are not going to survive in the long run, but as an industry, I don't think we're anywhere close to the crazy old days.
- thisisit 8y ago
  > I'd like to point out that profitability is not a black-and-white consideration. A company has many financial dials and switches, and ours specifically could have easily been profitable if they had chosen to do so. It was a very intentional decision to funnel money towards further growth, which frankly I had/have no issues with. I am unsure what you mean exactly but if the company is making a choice between being profitable and growth it is a black-and-white (or a binary) consideration. > A company has many financial dials and switches What are these financial dial and switches? It is one thing to opine whether a company might be profitable if they chose to and other to look at practical implications of this choice. An example, Uber might be chose to be profitable by raising ride prices or charging higher commissions to drivers or other means but it might lead to many drivers jumping ship or users booking less rides etc.
  - stanfordkid 8y ago
    It's really not. You gamble with your margins -- it's a continuous variable. You could be profitable by a cent or millions of dollars, or not at all. Each of these decisions yields a very different growth and risk trajectory. The label of "profitable" itself is pretty meaningless, given that you are at battle over many many years against competitors. One quarter of profitability might yield doom 3 quarters down the line due to lack of investment.
    - nickelcitymario 8y ago
      > The label of "profitable" itself is pretty meaningless, given that you are at battle over many many years against competitors. Good God, that's a terrifying statement. When business stops being about "making money", I don't know what we're doing anymore. The point of battling the competition is to make money. It's not about crushing them, beating them, or even being more profitable than them. It's about making money. Yes, it's absolutely valid to choose to sacrifice a period of profitability in order to strategically set yourself up for better profits later. And if crushing the competition is how we do that, great. But this game of never making profits is a fools game. If I invest my money in your company, it's because I expect you to make me money. If the only way you make me money is by raising the value of the stock, then we're in a game of Dutch tulips, and the only question is whether I can time selling my stock properly to not be the greater fool. But if you make me money by running a profitable company and disbursing the dividends, I'll hold onto that stock forever. One of those approaches is ethical. The other is a scam.
3xblah 8y ago
"These companies' newly public shares are far less likely to melt down as occurred with the class of 2000. For one, companies in the class of 2019 are far older, bigger in size and more sturdy as far as finances and management skills. The median age of today's tech IPOs is 12 years, which is two to three times the age of tech IPOs in 1999 and 2000, at four to five years, according to IPO expert Jay Ritter. Meanwhile, the median sales of the latest class of IPOs is nearly $174 million, more than 14 times bigger than the median $12 million in sales for the years 1999 and 2000." Source: https://www.investopedia.com/why-ipos-of-2019-won-t-crash-like-2000-dotcom-bubble-4682579 https://www.investopedia.com/why-ipos-of-2019-won-t-crash-li...

jypepin 8y ago

I don't disagree, but it's been 10 years that we keep hearing that "<insert something> are now showing that the dot com burst is coming again"

z3t4 8y ago
Bubble bursts are entirely speculative. When people think the bubble have burst or are about to burst, that's when it will burst.

romanhn 8y ago

I see the profit angle brought out often in these discussions, and as someone that has worked at one of these unicorns with a recent IPO, I'd like to point out that profitability is not a black-and-white consideration. A company has many financial dials and switches, and ours specifically could have easily been profitable if they had chosen to do so. It was a very intentional decision to funnel money towards further growth, which frankly I had/have no issues with. I suspect that is the case with many B2B unicorns; not sure the B2C ones could make a similar transition as easily if circumstances called for it. Not sure the dotcom crash is comparable - those were the days of companies getting millions without so much as a business plan, and going public months after being born. Sure, the companies without solid fundamentals are not going to survive in the long run, but as an industry, I don't think we're anywhere close to the crazy old days.

thisisit 8y ago
> I'd like to point out that profitability is not a black-and-white consideration. A company has many financial dials and switches, and ours specifically could have easily been profitable if they had chosen to do so. It was a very intentional decision to funnel money towards further growth, which frankly I had/have no issues with. I am unsure what you mean exactly but if the company is making a choice between being profitable and growth it is a black-and-white (or a binary) consideration. > A company has many financial dials and switches What are these financial dial and switches? It is one thing to opine whether a company might be profitable if they chose to and other to look at practical implications of this choice. An example, Uber might be chose to be profitable by raising ride prices or charging higher commissions to drivers or other means but it might lead to many drivers jumping ship or users booking less rides etc.
- stanfordkid 8y ago
  It's really not. You gamble with your margins -- it's a continuous variable. You could be profitable by a cent or millions of dollars, or not at all. Each of these decisions yields a very different growth and risk trajectory. The label of "profitable" itself is pretty meaningless, given that you are at battle over many many years against competitors. One quarter of profitability might yield doom 3 quarters down the line due to lack of investment.
  - nickelcitymario 8y ago
    > The label of "profitable" itself is pretty meaningless, given that you are at battle over many many years against competitors. Good God, that's a terrifying statement. When business stops being about "making money", I don't know what we're doing anymore. The point of battling the competition is to make money. It's not about crushing them, beating them, or even being more profitable than them. It's about making money. Yes, it's absolutely valid to choose to sacrifice a period of profitability in order to strategically set yourself up for better profits later. And if crushing the competition is how we do that, great. But this game of never making profits is a fools game. If I invest my money in your company, it's because I expect you to make me money. If the only way you make me money is by raising the value of the stock, then we're in a game of Dutch tulips, and the only question is whether I can time selling my stock properly to not be the greater fool. But if you make me money by running a profitable company and disbursing the dividends, I'll hold onto that stock forever. One of those approaches is ethical. The other is a scam.

3xblah 8y ago

"These companies' newly public shares are far less likely to melt down as occurred with the class of 2000. For one, companies in the class of 2019 are far older, bigger in size and more sturdy as far as finances and management skills. The median age of today's tech IPOs is 12 years, which is two to three times the age of tech IPOs in 1999 and 2000, at four to five years, according to IPO expert Jay Ritter. Meanwhile, the median sales of the latest class of IPOs is nearly $174 million, more than 14 times bigger than the median $12 million in sales for the years 1999 and 2000." Source: https://www.investopedia.com/why-ipos-of-2019-won-t-crash-like-2000-dotcom-bubble-4682579 https://www.investopedia.com/why-ipos-of-2019-won-t-crash-li...