4 ms·

It seems like 90% of startups have the business plan "step 1: get as many users as possible at any cost, step 3: profit." Hardly anyone talks about it or seems

It seems like 90% of startups have the business plan "step 1: get as many users as possible at any cost, step 3: profit." Hardly anyone talks about it or seems to think it's weird. I don't get it.

chrisseaton 7y ago
But it's often effective. Big companies like Facebook will pay cash or valuable equity to take those engaged users off your hands in an acquisition.
- Bartweiss 7y ago
  It's definitely worth remembering that what sounds idiotic in specific cases is often either gambling or a principal-agent problem on a systemic level. Growth potential and demand elasticity are both hard to predict, so VCs are betting on high growth and trusting that one high-demand win can pay off 100 or 1,000 losses. (The people chasing proven revenue with unknown growth potential are banks, investing in things like expanding existing stores.) Did MoviePass show a <1% chance of succeeding? Probably. <0.1%? I'm not so sure. As for founders... Often, they're gamblers or extremely self-confident. Less generously, the field attracts a lot of people who are happy to burn someone else's money on a ridiculous narrative, while their actual focus is on getting acquired or elevating their personal reputation. (And heck, there are VCs doing this too. Consistently returning 25% on your fund is nice, but funding Snapchat will get you a job at a fancy Sandhill office, and funding Facebook will get you treated as a rainmaker and even a political player.)
Bartweiss 7y ago
My favorite summary of this entire pattern is that VCs would happily fund a company which sold dollar bills for $0.90, figuring they could get users now and raise prices later. (After all, they already raised the price from $0.70 and nobody complained!)
- kccqzy 7y ago
  The VCs are banking on that startup playing obnoxious and privacy-invading ads to customers while they purchase their dollar bill with $0.90.
  - tjoff 7y ago
    What about the other missing $0.06? Oh, I get it, they sell antidepressants for the society they ruined.
  - m463 7y ago
    But what is the value of the list of customers that sign up to purchase the dollar bills? It could be like the list of folks who buy stuff on late-night infomercials. VC exit strategy: sell stock, get list and bail.
TrackerFF 7y ago
Well, yeah, it's because that's all you hear from incubators, accelerators, investors, etc. I've been to so, so many startup / entrepreneurship conferences / competitions / workshops and what not the past years, where the main takeaway has been: "Growth is everything, business models can be reshaped later on". I mean, sure, it's all fun and games for the startups and consumers - they're being bankrolled and subsidized by VC money, but it's a very artificial state. Lots of products start to suck the moment monetization enters the picture.
6gvONxR4sf7o 7y ago
Everyone constantly talks about it. At least on sites like this.
scarface74 7y ago
There is nothing weird about it. Profit is not the goal of either the management of the company or the investors. Their goal is either to get acquired or go public and sell their shares as soon as possible.
dclowd9901 7y ago
It stands to reason that once they got a critical mass of users, they would be able to negotiate ticket prices with theaters, a la a distributorship like Wal-Mart, Costco or Amazon. The trick is holding out long enough to get there, and I think they severely underestimated the general public's free time.

It seems like 90% of startups have the business plan "step 1: get as many users as possible at any cost, step 3: profit." Hardly anyone talks about it or seems to think it's weird. I don't get it.

chrisseaton 7y ago

But it's often effective. Big companies like Facebook will pay cash or valuable equity to take those engaged users off your hands in an acquisition.

Bartweiss 7y ago
It's definitely worth remembering that what sounds idiotic in specific cases is often either gambling or a principal-agent problem on a systemic level. Growth potential and demand elasticity are both hard to predict, so VCs are betting on high growth and trusting that one high-demand win can pay off 100 or 1,000 losses. (The people chasing proven revenue with unknown growth potential are banks, investing in things like expanding existing stores.) Did MoviePass show a <1% chance of succeeding? Probably. <0.1%? I'm not so sure. As for founders... Often, they're gamblers or extremely self-confident. Less generously, the field attracts a lot of people who are happy to burn someone else's money on a ridiculous narrative, while their actual focus is on getting acquired or elevating their personal reputation. (And heck, there are VCs doing this too. Consistently returning 25% on your fund is nice, but funding Snapchat will get you a job at a fancy Sandhill office, and funding Facebook will get you treated as a rainmaker and even a political player.)

Bartweiss 7y ago

My favorite summary of this entire pattern is that VCs would happily fund a company which sold dollar bills for $0.90, figuring they could get users now and raise prices later. (After all, they already raised the price from $0.70 and nobody complained!)

kccqzy 7y ago
The VCs are banking on that startup playing obnoxious and privacy-invading ads to customers while they purchase their dollar bill with $0.90.
- tjoff 7y ago
  What about the other missing $0.06? Oh, I get it, they sell antidepressants for the society they ruined.
- m463 7y ago
  But what is the value of the list of customers that sign up to purchase the dollar bills? It could be like the list of folks who buy stuff on late-night infomercials. VC exit strategy: sell stock, get list and bail.

TrackerFF 7y ago

Well, yeah, it's because that's all you hear from incubators, accelerators, investors, etc. I've been to so, so many startup / entrepreneurship conferences / competitions / workshops and what not the past years, where the main takeaway has been: "Growth is everything, business models can be reshaped later on". I mean, sure, it's all fun and games for the startups and consumers - they're being bankrolled and subsidized by VC money, but it's a very artificial state. Lots of products start to suck the moment monetization enters the picture.

6gvONxR4sf7o 7y ago

Everyone constantly talks about it. At least on sites like this.

scarface74 7y ago

There is nothing weird about it. Profit is not the goal of either the management of the company or the investors. Their goal is either to get acquired or go public and sell their shares as soon as possible.

dclowd9901 7y ago

It stands to reason that once they got a critical mass of users, they would be able to negotiate ticket prices with theaters, a la a distributorship like Wal-Mart, Costco or Amazon. The trick is holding out long enough to get there, and I think they severely underestimated the general public's free time.