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Google didn't make money, but Google almost went under before they managed to leech off of an idea from Overture and start making money with PPC. It is a falla

Google didn't make money, but Google almost went under before they managed to leech off of an idea from Overture and start making money with PPC. It is a fallacy to say that because just because Google did not make money right away that it is acceptable for any business to flounder along for years with no identifiable monetization in sight. Amazon didn't make money right away either, but just because Google and Amazon started making money doesn't mean that every internet startup will become Google or Amazon. Twitter should have been making money for some time now; it's absolutely ludicrous that they aren't. If Tumblr is really getting 10 billion page views, what are they waiting for? I don't understand where the money comes from to throw into these projects that have no track record of profitability. To put it another way, would investors pour $85 million of new investment into Burger King tomorrow? How about Sears? These are companies with massive revenue and decades of profit and investors would be hard pressed to just hand them millions - when companies like Burger King get money, it's with terms, i.e., loans to build new locations. Juxtaposed against handing Tumblr $85 million just so they can afford to keep their servers going is incredibly silly.

deleted 15y ago
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ig1 15y ago
I don't think you really understand what VC funds do, VC funds invest in high-risk high-reward opportunities. Let's assume that Tumblr is worth $400m today, given their current growth rate there's a reasonable chance they might be worth a few billion within the next couple of years. The chances of Sears or Burger King increasing their value by 3-5x in the next couple of years are negligible. VCs invest in companies which have the potential to grow rapidly and return 10x+ on their investment (less with later stage companies), these are high risk investments, but the investment is done as part of a portfolio on the assumption that that the return from the successful companies will far outweigh the return from the companies that fail. Good VCs have over the last few decades had better returns than index trackers and the like using this approach, hence they attract investors who are happy with this higher risk investment approach.
tlack 15y ago
People invest in hot properties like Tumblr for the same reason people will pay a significant premium for real estate on busy intersections: they have access to tons of "eyeballs" (I know, I know, hackneyed term) and it's a lot easier to figure out how to make $85 million with 10 billion page views then it is to start with $85 million and 0 page views.

deleted 15y ago

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ig1 15y ago

I don't think you really understand what VC funds do, VC funds invest in high-risk high-reward opportunities. Let's assume that Tumblr is worth $400m today, given their current growth rate there's a reasonable chance they might be worth a few billion within the next couple of years. The chances of Sears or Burger King increasing their value by 3-5x in the next couple of years are negligible. VCs invest in companies which have the potential to grow rapidly and return 10x+ on their investment (less with later stage companies), these are high risk investments, but the investment is done as part of a portfolio on the assumption that that the return from the successful companies will far outweigh the return from the companies that fail. Good VCs have over the last few decades had better returns than index trackers and the like using this approach, hence they attract investors who are happy with this higher risk investment approach.

tlack 15y ago

People invest in hot properties like Tumblr for the same reason people will pay a significant premium for real estate on busy intersections: they have access to tons of "eyeballs" (I know, I know, hackneyed term) and it's a lot easier to figure out how to make $85 million with 10 billion page views then it is to start with $85 million and 0 page views.