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Most S1 on HN are companies that spend $3 to get $1 in revenue. It was explained to me that this is totally normal and very different from DotCom companies lite

Most S1 on HN are companies that spend $3 to get $1 in revenue. It was explained to me that this is totally normal and very different from DotCom companies literally buying revenue.

HWR_14 5y ago
Are you being sarcastic or not? And what are the explanations you've heard?
- stefan_ 5y ago
  Half sarcastic, half serious? I think the prevailing theory is that yes these companies are spending tons of money to get a little bit of money, but it's a one time per customer expense and that customer will still be there for many more quarters, paying monthly dues.
  - amelius 5y ago
    Sounds a lot like: https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing And is illegal in some jurisdictions and frowned upon in others.
    - NovemberWhiskey 5y ago
      No? The point is just that revenue for subscription models recurs whereas build cost does not (handwave).
      - amelius 5y ago
        Yes? There are operational costs involved as well. It's not like a company fires half of their team after the product is launched.
        kevin_thibedeau 5y ago
        > It's not like a company fires half of their team after the product is launched. Not an uncommon VC/PE strategy. Wait two years and see what happens.
  - manquer 5y ago
    The theory is lot stronger/valid in enterprise sales like gitlab, customers take a lot of time to switch even if they are not satisfied with a product, there may not viable competitior with bespoke solution the same your current provider gives you etc It is far less true for consumer/SMB mid market products as cost of leaving there is not high.
    - stefan_ 5y ago
      Oh yeah, I think GitLab will make a fine company. Even if as a user of their product I routinely find it to be half-baked, but of course in enterprise the actual user is commonly the least important aspect of any deal.
      - Aeolun 5y ago
        > Even if as a user of their product I routinely find it to be half-baked I thought so too, but then my enterprise started moving to Github. Hoo boy, that’s a whole different can of worms. Their core functionality is great, but if you need anything outside of that you are shit out of luck.
    - Gigachad 5y ago
      A lot of that money gets spent on adding features to win sales and those features are a one time cost so they can be used for free to win new customers later. GitLab pushes hard to be the do everything tool.

Most S1 on HN are companies that spend $3 to get $1 in revenue. It was explained to me that this is totally normal and very different from DotCom companies literally buying revenue.

HWR_14 5y ago

Are you being sarcastic or not? And what are the explanations you've heard?

stefan_ 5y ago
Half sarcastic, half serious? I think the prevailing theory is that yes these companies are spending tons of money to get a little bit of money, but it's a one time per customer expense and that customer will still be there for many more quarters, paying monthly dues.
- amelius 5y ago
  Sounds a lot like: https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing And is illegal in some jurisdictions and frowned upon in others.
  - NovemberWhiskey 5y ago
    No? The point is just that revenue for subscription models recurs whereas build cost does not (handwave).
    - amelius 5y ago
      Yes? There are operational costs involved as well. It's not like a company fires half of their team after the product is launched.
      - kevin_thibedeau 5y ago
        > It's not like a company fires half of their team after the product is launched. Not an uncommon VC/PE strategy. Wait two years and see what happens.
- manquer 5y ago
  The theory is lot stronger/valid in enterprise sales like gitlab, customers take a lot of time to switch even if they are not satisfied with a product, there may not viable competitior with bespoke solution the same your current provider gives you etc It is far less true for consumer/SMB mid market products as cost of leaving there is not high.
  - stefan_ 5y ago
    Oh yeah, I think GitLab will make a fine company. Even if as a user of their product I routinely find it to be half-baked, but of course in enterprise the actual user is commonly the least important aspect of any deal.
    - Aeolun 5y ago
      > Even if as a user of their product I routinely find it to be half-baked I thought so too, but then my enterprise started moving to Github. Hoo boy, that’s a whole different can of worms. Their core functionality is great, but if you need anything outside of that you are shit out of luck.
  - Gigachad 5y ago
    A lot of that money gets spent on adding features to win sales and those features are a one time cost so they can be used for free to win new customers later. GitLab pushes hard to be the do everything tool.