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This was, what, 2012? Asana IPO'd last year and still wasn't profitable[0]. In fact, they were bleeding vast amounts of cash and went public with the statement:

This was, what, 2012? Asana IPO'd last year and still wasn't profitable[0]. In fact, they were bleeding vast amounts of cash and went public with the statement: We do not expect to become profitable in the near future, may never achieve profitability, and have incurred substantial net operating losses, or NOLs, during our history. This is the price of cheap money. VC-backed competitors can simply outspend a bootstrapped company on customer acquisition, marketing, development and hiring, and cash out without the company ever actually making a profit. In the current environment, a bootstrapped company should ideally be: (a) niche (and therefore outside the traditional VC market crosshairs) (b) profitable from day one. A to-do list doesn't fit that mould at all, which this guy found out the hard way. [0] https://sec.report/Document/0001193125-20-228462/ https://sec.report/Document/0001193125-20-228462/

davedx 6y ago
Sounds like Snowflake. If you dig into their income statement you see on 264m revenue, they spend 293m on Sales and marketing. [1] Whether Snowflake is actually a great data warehouse product or not, the main driver of its success is that they spend more than a quarter of a billion dollars per year selling it. This is the state of play in the SaaS business. [1] https://www.sec.gov/Archives/edgar/data/1640147/000162828020013010/snowflakes-1.htm#ia73499eb79a34ddeaa563501d30356b0_40 https://www.sec.gov/Archives/edgar/data/1640147/000162828020...
- PhilipA 6y ago
  That is pretty normal on high scaling SaaS solutions. If you earn 100k a year on a solution, and you know they in average stay for 5 years, you might spend 150k to acquire them as it is still a good business.
  - davedx 6y ago
    By that logic, as long as you're growing you'll always be losing tons of money and never be profitable? How is that a good business model? I mean we're only talking about revenue vs sales and marketing spend here -- the business has a load of other costs too.
    - snovv_crash 6y ago
      You're effectively gambling on running out of new customers at some point. What a world!
    - throwawayfire 6y ago
      That's a great business model if you have investors. You get a proven long-term return of 25% per annum. If you're doing it out of your own bank account, you'll bankrupt before realising this return: it's not a lifestyle business.
    - alangibson 6y ago
      > as long as you're growing you'll always be losing tons of money and never be profitable? Basically yea. This effect is just assumed in the world of physical products. As long as you're growing you're nearly out of business because you need to use N revenues to buy your next N+1 of stock.
    - ckdarby 6y ago
      You hit a tipping point with enough market grab that customers start to approach you without advertising. There is volume discount as you grow. There is upsell potential on the customers you've signed. As your signed customers grow their pockets grow to spend more on the solution. Takes about 3-6. If I use Snowflake today at company X without issue and I switch jobs in a couple years to a new company that hasn't picked their platform, what do you think most people will pick?
- sjg007 6y ago
  Snowflake is basically the alternative to Google big-query. It's slightly cumbersome and needs a better Web UI but pretty good. It meshes the idea of public and private databases.
threeseed 6y ago
Atlassian is also targeting them with Jira Work Management: https://www.atlassian.com/software/jira/work-management https://www.atlassian.com/software/jira/work-management And could well be priced as a loss-leader purely to upsell the rest of their ever growing stack in the future. I wouldn't be betting on Asana surviving such a direct, sustained attack from a well capitalised company.
- patentatt 6y ago
  And everyone will wind up using it, paying for it, and hating it. Lol.
ThePhysicist 6y ago
Early investors probably don't care (much) if Asana will ever become profitable. They probably got back 10-100x their investment via the IPO, so they have already "won". That said we need a more level playing field for smaller companies, as large VC-backed startups suck the air out of many markets that could support a much more diverse ecosystem otherwise.
- pas 6y ago
  There are a bunch of competitors. And just as the twitter thread demonstrates users will ask for more features and you need a load of cash to deliver. And Flow is still around. The problem is not diversity, it's productivity of startups and more directly the cost of product development (which is of course itself inflated due to endless money).
  - thu2111 6y ago
    It's a pricing issue too. Asana may have over-invested relative to what people were really willing to pay for those features. However VC backing makes price-based competition irrelevant, because your competitors pricing isn't real.
  - randomsearch 6y ago
    the problem is insanely cheap VC money
karlerss 6y ago
Some companies are willing to sell dollar bills for 75 cents[0]. It's fine if you take on a business risk and it materializes (or pays off), but I wonder if there are companies/founders/executives who maliciously spend investor money with no expectation of positive return for the company. [0] https://www.nytimes.com/2018/05/16/technology/moviepass-economy-startups.html https://www.nytimes.com/2018/05/16/technology/moviepass-econ...
- qeternity 6y ago
  Absolutely. Everyone does it though, including the VCs. Greater fool theory is dominant investment theme at the moment. It’s terrible.
  - pas 6y ago
    Why is it terrible if it works? What would you recommend? How could we change it to something better?
    - jsiepkes 6y ago
      It doesn't work because it is unsustainable. This will never hold. There is no such thing as free money. We should try to get (back) to the point where companies actually need to make a profit in order to survive.
      - thu2111 6y ago
        It is sustainable and there is such a thing as free money. Ultimately all this useless activity traces back to governments and their obsession with GDP. Asana has never made money but it spends money so it counts as economic growth. The money itself comes from QE and government manipulations of the markets via printing. There is in fact no reason why governments cannot keep forcibly reallocating money from savings to startups forever, and given that sound money has vanished from the political conversation for many years now, it likely will. It's a depressing thought, really. There is no use in attempting to play by the rules and building something useful for an effort that can justify the results. Governments don't care about that. What they care about is that you're doing something. Exactly what you're doing, doesn't matter.
atdrummond 6y ago
While I agree with your general sentiment, I should caution that every S-1 (as well as 10-K) contains such horrifying language; if not regarding the firm’s present losses, then regarding the many ways the firm could begin losing money and/or value. The entire purpose of these statements, and the sections in which they reside, is to provide appropriate cover for the firm when potentially desperate investors begin to think about legal action against the company. This way, the business can point to their compliance with their legal obligation to disclose potential deleterious outcomes as well as to the fact that the equity holder was aware of any associated risks at the time of their investment.
- unishark 6y ago
  Indeed the precise wording itself is basically boilerplate that one sees all the time with startups. Though such language and sections aren't solely about cynical "legal CYA", but valuable warnings to investors. I would not want to take money from investors who think they are getting a sure thing, only from people who understand the risks.
- nmfisher 6y ago
  Well, yes and no. Every disclosure document says something along the lines of "profits aren't guaranteed". But not every disclosure document says "we've lost shitloads of money and haven't made a profit". I'm not sure where along the line IPOs changed from "profitable company raises money from the public" to "private investors parachute out and dump their losses on Joe Schmuck".
  - daniellarusso 6y ago
    Mark Cuban can probably tell you.
  - airstrike 6y ago
    That's quite a lot of hyperbole... Private investors "parachute out" only 20% of their stake in an IPO to investors who willingly buy into the story because they believe (rightly or wrongly) in the upside. It's not exactly like Joe Schmuck is unwillingly forced to hold on a hot potato
nicbou 6y ago
It blows my mind that so much money is being spent on companies that seemingly have no road to profitability, or expect that their users will stay when they rise the prices to a profitable level. I wonder how many more mobility startups we can dump money into before accepting that it will fail like the five identical companies before it. I always joke that my humble little website is more profitable than Uber, Airbnb, Lyft, Pinterest, Slack, Dropbox and a few other companies combined, and was so since day 1. (E: not Twitter) Maybe I think too small, but when I divide these companies' losses by their number of users, I can't imagine how they could possibly work if they weren't sustained with massive amounts of money.
- pas 6y ago
  Twitter had very good years recently. (The user experience has not improved though.)
- nl 6y ago
  You realise that Twitter is profitable, right? And Facebook wasn't profitable once, too.
  - nicbou 6y ago
    Has it made up for the decade of losses? EDIT: Yes, it's apparently up ~53 million now. I replaced Twitter with 5 other giant companies that are losing money.
    - virgilp 6y ago
      This does show you the fallacy in your line of thinking, right? Twitter was on that list, and now it's not. In 5 years, maybe none of the companies in your list will be in it; sure you will easily find "replacements" that are just as popular/well known, but the thing is that that's exactly the model: "grow aggressively, capture the market, become profitable once you're market leader". It doesn't always work, but it's hard to dispute that it sometimes works, and when it does, it yields tremendous profits. It's not a bug, it's a feature :)
lordnacho 6y ago
I think it's an indictment of our current system. The toy explanation for how it works is that we have people who take risks, and they have to be rewarded now and again, otherwise why would anyone do it? So it has to be possible to trade that risk too, so that the risk ends up in the appropriate place. It needs to be possible to run a business at a loss in order to search for profits (product-market fit, etc). We seem to have taken this to an extreme that rewards people who haven't made something useful. If I have a great idea for new kind of lemonade stand, I can get it started at a loss, but if I can convince someone else to buy it, I can cash out with more than I put in. They can go and "develop" the idea and sell that up to someone else. Sounds fine, and should be fine, in theory. Most people could probably think of a few defenses: they're only losing their own money, losses impose a disclipline that forces them to listen to customers, and it's everyone's interest to make money in the end. The downsides are not so obvious. Everyone can start a lemonade stand, and sure enough there are loads of them all over. But who gets to try? People who can get access to the risk capital. It's not quite the same as the alternative world where ventures need to make money reasonably fast, or sink. It also means if you try on your own, you are competing with much more patient people who can afford to lose for longer. So now, you can't even try your own without giving a piece to someone else, who gets to decide who gets a shot and who doesn't.
- DrBazza 6y ago
  > I think it's an indictment of our current system. Do you mean the USA, or tech in general? In the UK, whilst there is VC money, it tends to be less, and more focused. I believe the bankruptcy laws in the US vs the UK are significantly different to the point where attitude to risk influences business start ups. In the US, from this side of the pond, venture capital investment appears very cavalier, with VCs throwing money left, right and centre, hoping that they'll land on the next unicorn. In the UK, VC money is much more targeted on start ups with a plan to profitability.
  - lordnacho 6y ago
    The longer the easy money, stock-market-may-not-go-down regime continues, the more the lagging VC cultures like the UK and Europe will tend towards the US. I'm not sure how the bankruptcy laws come into this though? Limited liability corporations exist everywhere, and there's mostly no suggestion of piercing-the-veil fraud or dishonesty.
polote 6y ago
> In the current environment, a bootstrapped company should ideally be: (a) niche (and therefore outside the traditional VC market crosshairs) (b) profitable from day one. The fact that it is bootstrapped prevent it to operate without being profitable. That is tied to the definition of bootstrapped. On a more nuanced tone. You can be bootstrapped in the note-taking space. Yeah this specific guy did not manage to do it. But he is a specific case (Excluding the fact that he had 10M of cash, who has that ?). He wanted the differentiation point of his company to be the product and only product. This is a pretty risky strategy to follow. Usually you want to differentiate yourself in several areas. Seriously any company that goes out of business because of another company doesn't tell you the full story. There are very very few areas in which you will go out of business because of another company competing with you, and certainly note-taking, a space populated with thousands of companies
- fakedang 6y ago
  > He wanted the differentiation point of his company to be the product and only product. This is a pretty risky strategy to follow. Usually you want to differentiate yourself in several areas. What ways can you differentiate yourself? I mean he admits that Asana was VC funded and started with a crappy product that later became fleshed out to be better than his by hiring better devs, better designers, etc. While he was focusing on marketing and whatnot, Asana was burning VC money for marketing and hiring a better team. So yeah, honest question, did I miss out on any other factors?
deleted 6y ago
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mywacaday 6y ago
One of my favourite companies is teamwork.com, a great tool set in the same space, makes the fact that they were bootstrapped from the start and are profitable all the more impressive. https://www.irishtimes.com/business/technology/teamwork-pays-off-for-cork-entrepreneurs-behind-software-firm-1.3721014 https://www.irishtimes.com/business/technology/teamwork-pays...
fireeyed 6y ago
Startup advice ;) if you are not profitable just find a SPAC. All the dumb money (institutional, hedge) will follow it
torgian 6y ago
How the heck a company can continue to run without being profitable is beyond me.
- bidirectional 6y ago
  Because investors believe that the equity of the company is undervalued compared to the future cash flows. I'm sure plenty of poor investments have been made on this basis and you can't keep it going forever, but it seems pretty sensible that in some cases a company has great future earning potential without present profits. Especially on a site run by a firm specialising in such investments!
- yardie 6y ago
  I think it's the assumption that there is a market there and if they can outlive and outspend the competition, eventually, they'll have it all to themselves.
  - torgian 6y ago
    I understand this, but at some point you would think investors would cut their losses. I mean... _years_ without profitability. That's a long time.
    - yardie 6y ago
      Real estate is worse. I've watched developers sit on property for decades. Slowly buying up property around them as it comes up for sale. Just so they can build a fancy strip mall. If you try to bring rationality to money you're going to lose. None of it really makes sense and the rules get rewritten all the time.
notacoward 6y ago
To put a bit more nuance (or perhaps just spin) on it, the problem is not VC itself. VC can play a vital role in supporting innovation. Unfortunately, what it does far more often is let a bunch of marketing/financial dorks with strong connections to the money pipeline enter a young market and obliterate all of the actual innovators. It's not only innovation that gets lost, but diversity as well. Case in point: continuous data protection. If you were around ca. 2004 you might have heard of this. Like backup, only to any second in the past. Nowadays we might say git for your entire storage system. Anyway, I was a fairly early employee at one of the original companies in the space. It was our marketing VP who coined the term. We worked really hard to promote the idea, and often collaborated with our competitors in that (much like Asana in this story). Of course, that initial spirit of shared mission eventually disappeared. At that point, VC-backed and BigCo competitors were all spinning up their own products, backed by many times the engineering and (even more importantly) marketing budgets. They didn't actually win head to head, because they didn't actually have any products, but they totally froze the market. Storage is a hard market for a startup in the best of times, and these weren't the best of times, so that company ended up in a fire sale to Veritas/Symantec. End of story. It's pretty unremarkable in itself, except that I could tell almost the same story about half of the other startups I worked at. None of this is necessarily bad. Just "creative destruction" and all that. In the end good ideas do get implemented and benefit users and make someone a lot of money. Unfortunately, those people are rarely the ones who innovated. When it happens over and over and over throughout the industry, it starts to seem like VCs are setting up incentives to be a copier (at best) rather than an innovator, and I'm not sure that's healthy in the long term.
- peterwoerner 6y ago
  I think its just the nature of innovation. It takes 1/4 the effort to copy as to create new and this is true in marketing as well as engineering. Call it the second mover advantage, where someone else has already paid the cost of innovation, risk reduction and marketing (convincing people that they want x) and the second mover capitalizes on the new zeitgeist that they created but with lower overhead.
  - notacoward 6y ago
jacquesm 6y ago
I hate it when this happens. Because 9 out of 10 times the VC backed company eventually goes belly up but the bootstrapped ones that would have made it work will be collateral damage on the way to acquiring that little bit of knowledge. I had this happen with a company called Spotlife that competed with us in a niche (live video over the internet for consumers, something we now consider to be common and easy, but which was neither back in the day). Fortunately we had some very loyal customers and held on until they died but it was pretty ugly.
- thu2111 6y ago
  Do they go belly up? As far as I can tell bankruptcies of Valley startups stopped decades ago. I can't remember the last company that literally went bankrupt. Failing firms are always bought for undisclosed sums. VCs will not let their firms fail, they will always force one of their more successful bets to buy the less successful ones under the cover of some plausible-but-dubious strategy. I'm pretty sure the majority of all acquisitions in the VC-backed startup space are like this. They aren't real in the sense that they'd be happening independently. They're the VCs bailing themselves out.
markogresak 6y ago
> Asana IPO'd last year and still wasn't profitable This is interesting to hear. From my research last year, it’s more expensive compared to Jira. I had to use Asana at work for high-level planning and it was, in my experience working as an engineer, an inferior product compared to Jira. The only upside I could see is the reporting/project overview and search. But these features are only useful to the manager. For me, it’s just a cumbersome tool. I’ve tried to get used to it, but I wasn’t sold. Some things that made it difficult to use Asana: - No markdown support for the longest time. - No code block formatting. - Old comments collapsed by default, which hides the full context. This caused people to miss information and ask questions that were already answered. I do realize Jira and Asana are not trying to address the same problem space. But to manage a team of engineers I would pick Jira every time.

davedx 6y ago

Sounds like Snowflake. If you dig into their income statement you see on 264m revenue, they spend 293m on Sales and marketing. [1] Whether Snowflake is actually a great data warehouse product or not, the main driver of its success is that they spend more than a quarter of a billion dollars per year selling it. This is the state of play in the SaaS business. [1] https://www.sec.gov/Archives/edgar/data/1640147/000162828020013010/snowflakes-1.htm#ia73499eb79a34ddeaa563501d30356b0_40 https://www.sec.gov/Archives/edgar/data/1640147/000162828020...

PhilipA 6y ago
That is pretty normal on high scaling SaaS solutions. If you earn 100k a year on a solution, and you know they in average stay for 5 years, you might spend 150k to acquire them as it is still a good business.
- davedx 6y ago
  By that logic, as long as you're growing you'll always be losing tons of money and never be profitable? How is that a good business model? I mean we're only talking about revenue vs sales and marketing spend here -- the business has a load of other costs too.
  - snovv_crash 6y ago
    You're effectively gambling on running out of new customers at some point. What a world!
  - throwawayfire 6y ago
    That's a great business model if you have investors. You get a proven long-term return of 25% per annum. If you're doing it out of your own bank account, you'll bankrupt before realising this return: it's not a lifestyle business.
  - alangibson 6y ago
    > as long as you're growing you'll always be losing tons of money and never be profitable? Basically yea. This effect is just assumed in the world of physical products. As long as you're growing you're nearly out of business because you need to use N revenues to buy your next N+1 of stock.
  - ckdarby 6y ago
    You hit a tipping point with enough market grab that customers start to approach you without advertising. There is volume discount as you grow. There is upsell potential on the customers you've signed. As your signed customers grow their pockets grow to spend more on the solution. Takes about 3-6. If I use Snowflake today at company X without issue and I switch jobs in a couple years to a new company that hasn't picked their platform, what do you think most people will pick?
sjg007 6y ago
Snowflake is basically the alternative to Google big-query. It's slightly cumbersome and needs a better Web UI but pretty good. It meshes the idea of public and private databases.

threeseed 6y ago

Atlassian is also targeting them with Jira Work Management: https://www.atlassian.com/software/jira/work-management https://www.atlassian.com/software/jira/work-management And could well be priced as a loss-leader purely to upsell the rest of their ever growing stack in the future. I wouldn't be betting on Asana surviving such a direct, sustained attack from a well capitalised company.

patentatt 6y ago
And everyone will wind up using it, paying for it, and hating it. Lol.

ThePhysicist 6y ago

Early investors probably don't care (much) if Asana will ever become profitable. They probably got back 10-100x their investment via the IPO, so they have already "won". That said we need a more level playing field for smaller companies, as large VC-backed startups suck the air out of many markets that could support a much more diverse ecosystem otherwise.

pas 6y ago
There are a bunch of competitors. And just as the twitter thread demonstrates users will ask for more features and you need a load of cash to deliver. And Flow is still around. The problem is not diversity, it's productivity of startups and more directly the cost of product development (which is of course itself inflated due to endless money).
- thu2111 6y ago
  It's a pricing issue too. Asana may have over-invested relative to what people were really willing to pay for those features. However VC backing makes price-based competition irrelevant, because your competitors pricing isn't real.
- randomsearch 6y ago
  the problem is insanely cheap VC money

karlerss 6y ago

Some companies are willing to sell dollar bills for 75 cents[0]. It's fine if you take on a business risk and it materializes (or pays off), but I wonder if there are companies/founders/executives who maliciously spend investor money with no expectation of positive return for the company. [0] https://www.nytimes.com/2018/05/16/technology/moviepass-economy-startups.html https://www.nytimes.com/2018/05/16/technology/moviepass-econ...

qeternity 6y ago
Absolutely. Everyone does it though, including the VCs. Greater fool theory is dominant investment theme at the moment. It’s terrible.
- pas 6y ago
  Why is it terrible if it works? What would you recommend? How could we change it to something better?
  - jsiepkes 6y ago
    It doesn't work because it is unsustainable. This will never hold. There is no such thing as free money. We should try to get (back) to the point where companies actually need to make a profit in order to survive.
    - thu2111 6y ago
      It is sustainable and there is such a thing as free money. Ultimately all this useless activity traces back to governments and their obsession with GDP. Asana has never made money but it spends money so it counts as economic growth. The money itself comes from QE and government manipulations of the markets via printing. There is in fact no reason why governments cannot keep forcibly reallocating money from savings to startups forever, and given that sound money has vanished from the political conversation for many years now, it likely will. It's a depressing thought, really. There is no use in attempting to play by the rules and building something useful for an effort that can justify the results. Governments don't care about that. What they care about is that you're doing something. Exactly what you're doing, doesn't matter.

atdrummond 6y ago

While I agree with your general sentiment, I should caution that every S-1 (as well as 10-K) contains such horrifying language; if not regarding the firm’s present losses, then regarding the many ways the firm could begin losing money and/or value. The entire purpose of these statements, and the sections in which they reside, is to provide appropriate cover for the firm when potentially desperate investors begin to think about legal action against the company. This way, the business can point to their compliance with their legal obligation to disclose potential deleterious outcomes as well as to the fact that the equity holder was aware of any associated risks at the time of their investment.

unishark 6y ago
Indeed the precise wording itself is basically boilerplate that one sees all the time with startups. Though such language and sections aren't solely about cynical "legal CYA", but valuable warnings to investors. I would not want to take money from investors who think they are getting a sure thing, only from people who understand the risks.
nmfisher 6y ago
Well, yes and no. Every disclosure document says something along the lines of "profits aren't guaranteed". But not every disclosure document says "we've lost shitloads of money and haven't made a profit". I'm not sure where along the line IPOs changed from "profitable company raises money from the public" to "private investors parachute out and dump their losses on Joe Schmuck".
- daniellarusso 6y ago
  Mark Cuban can probably tell you.
- airstrike 6y ago
  That's quite a lot of hyperbole... Private investors "parachute out" only 20% of their stake in an IPO to investors who willingly buy into the story because they believe (rightly or wrongly) in the upside. It's not exactly like Joe Schmuck is unwillingly forced to hold on a hot potato

nicbou 6y ago

It blows my mind that so much money is being spent on companies that seemingly have no road to profitability, or expect that their users will stay when they rise the prices to a profitable level. I wonder how many more mobility startups we can dump money into before accepting that it will fail like the five identical companies before it. I always joke that my humble little website is more profitable than Uber, Airbnb, Lyft, Pinterest, Slack, Dropbox and a few other companies combined, and was so since day 1. (E: not Twitter) Maybe I think too small, but when I divide these companies' losses by their number of users, I can't imagine how they could possibly work if they weren't sustained with massive amounts of money.

pas 6y ago
Twitter had very good years recently. (The user experience has not improved though.)
nl 6y ago
You realise that Twitter is profitable, right? And Facebook wasn't profitable once, too.
- nicbou 6y ago
  Has it made up for the decade of losses? EDIT: Yes, it's apparently up ~53 million now. I replaced Twitter with 5 other giant companies that are losing money.
  - virgilp 6y ago
    This does show you the fallacy in your line of thinking, right? Twitter was on that list, and now it's not. In 5 years, maybe none of the companies in your list will be in it; sure you will easily find "replacements" that are just as popular/well known, but the thing is that that's exactly the model: "grow aggressively, capture the market, become profitable once you're market leader". It doesn't always work, but it's hard to dispute that it sometimes works, and when it does, it yields tremendous profits. It's not a bug, it's a feature :)

lordnacho 6y ago

I think it's an indictment of our current system. The toy explanation for how it works is that we have people who take risks, and they have to be rewarded now and again, otherwise why would anyone do it? So it has to be possible to trade that risk too, so that the risk ends up in the appropriate place. It needs to be possible to run a business at a loss in order to search for profits (product-market fit, etc). We seem to have taken this to an extreme that rewards people who haven't made something useful. If I have a great idea for new kind of lemonade stand, I can get it started at a loss, but if I can convince someone else to buy it, I can cash out with more than I put in. They can go and "develop" the idea and sell that up to someone else. Sounds fine, and should be fine, in theory. Most people could probably think of a few defenses: they're only losing their own money, losses impose a disclipline that forces them to listen to customers, and it's everyone's interest to make money in the end. The downsides are not so obvious. Everyone can start a lemonade stand, and sure enough there are loads of them all over. But who gets to try? People who can get access to the risk capital. It's not quite the same as the alternative world where ventures need to make money reasonably fast, or sink. It also means if you try on your own, you are competing with much more patient people who can afford to lose for longer. So now, you can't even try your own without giving a piece to someone else, who gets to decide who gets a shot and who doesn't.

DrBazza 6y ago
> I think it's an indictment of our current system. Do you mean the USA, or tech in general? In the UK, whilst there is VC money, it tends to be less, and more focused. I believe the bankruptcy laws in the US vs the UK are significantly different to the point where attitude to risk influences business start ups. In the US, from this side of the pond, venture capital investment appears very cavalier, with VCs throwing money left, right and centre, hoping that they'll land on the next unicorn. In the UK, VC money is much more targeted on start ups with a plan to profitability.
- lordnacho 6y ago
  The longer the easy money, stock-market-may-not-go-down regime continues, the more the lagging VC cultures like the UK and Europe will tend towards the US. I'm not sure how the bankruptcy laws come into this though? Limited liability corporations exist everywhere, and there's mostly no suggestion of piercing-the-veil fraud or dishonesty.

polote 6y ago

> In the current environment, a bootstrapped company should ideally be: (a) niche (and therefore outside the traditional VC market crosshairs) (b) profitable from day one. The fact that it is bootstrapped prevent it to operate without being profitable. That is tied to the definition of bootstrapped. On a more nuanced tone. You can be bootstrapped in the note-taking space. Yeah this specific guy did not manage to do it. But he is a specific case (Excluding the fact that he had 10M of cash, who has that ?). He wanted the differentiation point of his company to be the product and only product. This is a pretty risky strategy to follow. Usually you want to differentiate yourself in several areas. Seriously any company that goes out of business because of another company doesn't tell you the full story. There are very very few areas in which you will go out of business because of another company competing with you, and certainly note-taking, a space populated with thousands of companies

fakedang 6y ago
> He wanted the differentiation point of his company to be the product and only product. This is a pretty risky strategy to follow. Usually you want to differentiate yourself in several areas. What ways can you differentiate yourself? I mean he admits that Asana was VC funded and started with a crappy product that later became fleshed out to be better than his by hiring better devs, better designers, etc. While he was focusing on marketing and whatnot, Asana was burning VC money for marketing and hiring a better team. So yeah, honest question, did I miss out on any other factors?

deleted 6y ago

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mywacaday 6y ago

One of my favourite companies is teamwork.com, a great tool set in the same space, makes the fact that they were bootstrapped from the start and are profitable all the more impressive. https://www.irishtimes.com/business/technology/teamwork-pays-off-for-cork-entrepreneurs-behind-software-firm-1.3721014 https://www.irishtimes.com/business/technology/teamwork-pays...

fireeyed 6y ago

Startup advice ;) if you are not profitable just find a SPAC. All the dumb money (institutional, hedge) will follow it

torgian 6y ago

How the heck a company can continue to run without being profitable is beyond me.

bidirectional 6y ago
Because investors believe that the equity of the company is undervalued compared to the future cash flows. I'm sure plenty of poor investments have been made on this basis and you can't keep it going forever, but it seems pretty sensible that in some cases a company has great future earning potential without present profits. Especially on a site run by a firm specialising in such investments!
yardie 6y ago
I think it's the assumption that there is a market there and if they can outlive and outspend the competition, eventually, they'll have it all to themselves.
- torgian 6y ago
  I understand this, but at some point you would think investors would cut their losses. I mean... _years_ without profitability. That's a long time.
  - yardie 6y ago
    Real estate is worse. I've watched developers sit on property for decades. Slowly buying up property around them as it comes up for sale. Just so they can build a fancy strip mall. If you try to bring rationality to money you're going to lose. None of it really makes sense and the rules get rewritten all the time.

notacoward 6y ago

To put a bit more nuance (or perhaps just spin) on it, the problem is not VC itself. VC can play a vital role in supporting innovation. Unfortunately, what it does far more often is let a bunch of marketing/financial dorks with strong connections to the money pipeline enter a young market and obliterate all of the actual innovators. It's not only innovation that gets lost, but diversity as well. Case in point: continuous data protection. If you were around ca. 2004 you might have heard of this. Like backup, only to any second in the past. Nowadays we might say git for your entire storage system. Anyway, I was a fairly early employee at one of the original companies in the space. It was our marketing VP who coined the term. We worked really hard to promote the idea, and often collaborated with our competitors in that (much like Asana in this story). Of course, that initial spirit of shared mission eventually disappeared. At that point, VC-backed and BigCo competitors were all spinning up their own products, backed by many times the engineering and (even more importantly) marketing budgets. They didn't actually win head to head, because they didn't actually have any products, but they totally froze the market. Storage is a hard market for a startup in the best of times, and these weren't the best of times, so that company ended up in a fire sale to Veritas/Symantec. End of story. It's pretty unremarkable in itself, except that I could tell almost the same story about half of the other startups I worked at. None of this is necessarily bad. Just "creative destruction" and all that. In the end good ideas do get implemented and benefit users and make someone a lot of money. Unfortunately, those people are rarely the ones who innovated. When it happens over and over and over throughout the industry, it starts to seem like VCs are setting up incentives to be a copier (at best) rather than an innovator, and I'm not sure that's healthy in the long term.

peterwoerner 6y ago
I think its just the nature of innovation. It takes 1/4 the effort to copy as to create new and this is true in marketing as well as engineering. Call it the second mover advantage, where someone else has already paid the cost of innovation, risk reduction and marketing (convincing people that they want x) and the second mover capitalizes on the new zeitgeist that they created but with lower overhead.
- notacoward 6y ago

jacquesm 6y ago

I hate it when this happens. Because 9 out of 10 times the VC backed company eventually goes belly up but the bootstrapped ones that would have made it work will be collateral damage on the way to acquiring that little bit of knowledge. I had this happen with a company called Spotlife that competed with us in a niche (live video over the internet for consumers, something we now consider to be common and easy, but which was neither back in the day). Fortunately we had some very loyal customers and held on until they died but it was pretty ugly.

thu2111 6y ago
Do they go belly up? As far as I can tell bankruptcies of Valley startups stopped decades ago. I can't remember the last company that literally went bankrupt. Failing firms are always bought for undisclosed sums. VCs will not let their firms fail, they will always force one of their more successful bets to buy the less successful ones under the cover of some plausible-but-dubious strategy. I'm pretty sure the majority of all acquisitions in the VC-backed startup space are like this. They aren't real in the sense that they'd be happening independently. They're the VCs bailing themselves out.

markogresak 6y ago

> Asana IPO'd last year and still wasn't profitable This is interesting to hear. From my research last year, it’s more expensive compared to Jira. I had to use Asana at work for high-level planning and it was, in my experience working as an engineer, an inferior product compared to Jira. The only upside I could see is the reporting/project overview and search. But these features are only useful to the manager. For me, it’s just a cumbersome tool. I’ve tried to get used to it, but I wasn’t sold. Some things that made it difficult to use Asana: - No markdown support for the longest time. - No code block formatting. - Old comments collapsed by default, which hides the full context. This caused people to miss information and ask questions that were already answered. I do realize Jira and Asana are not trying to address the same problem space. But to manage a team of engineers I would pick Jira every time.