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> Can you VC fund something loss making long enough so that it corners the market somehow / gains some other crushing advantage. This is Uber's model. This is

by acchow 5y ago

> Can you VC fund something loss making long enough so that it corners the market somehow / gains some other crushing advantage. This is Uber's model. This is not every VC-funded company's model. Google was a money-loser for quite some time, but each additional search gave positive returns. There's just so much other fixed-cost overhead that you really need to expand the business massively so that you can "make it up in volume". This is the most common "tech startup" model - very high startup and fixed cost which takes years to build a large enough customer base to overcome. As far as I understand it, Uber for many years lost more money with each additional trip. This is the "selling $10 bills for $5" model. Which certainly lets you grow your market and hope for a future where you have pricing power and can raise prices. This is your "crushing advantage" model.

Animats 5y ago
Google was a money-loser for quite some time No. Google was incorporated in 1998, profitable in 2001, and the IPO was in 2004. Total investment pre-IPO was about $25 million.
- scarface74 5y ago
  Out of all five of the largest tech companies - Facebook, Apple, Amazon, Microsoft and Google. Only Amazon ran at a loss for any significant amount of time before IPOing.
  - skippyboxedhero 5y ago
    It was very obvious that Amazon wasn't unprofitable in any real sense. They only raised $100m, and they kept growing. The difference with Amazon is that they have a very capital-intensive business, and when these grow very quickly then the accounting is basically useless (you see this with some ecomm companies, in some countries the market literally does not understand operating leverage in these businesses...so the business will build a new warehouse, the stock will drop 75%, top-line is growing 50%/year, and then the stock 10x when operating leverage comes through). I think profitability is a sign that your business works. The "first-mover" advantage is way, way, way overstated. Investing is growth is great, but some businesses are clearly investing in growth that is unprofitable (one interesting example here is NFLX, they generate a profit in accounting terms but it is pretty clear that their business is either not profitable or taking on massive risk for marginal profit).
    - scarface74 5y ago
      I can’t find it now. But I can swear I read that Amazon was lucky enough to get a line of credit right before the dot com bust. But Amazon wasn’t profitable. It used cash flow from the time it received money from customers and paid suppliers to grow.

by acchow 5y ago

Animats 5y ago

Google was a money-loser for quite some time No. Google was incorporated in 1998, profitable in 2001, and the IPO was in 2004. Total investment pre-IPO was about $25 million.

scarface74 5y ago
Out of all five of the largest tech companies - Facebook, Apple, Amazon, Microsoft and Google. Only Amazon ran at a loss for any significant amount of time before IPOing.
- skippyboxedhero 5y ago
  It was very obvious that Amazon wasn't unprofitable in any real sense. They only raised $100m, and they kept growing. The difference with Amazon is that they have a very capital-intensive business, and when these grow very quickly then the accounting is basically useless (you see this with some ecomm companies, in some countries the market literally does not understand operating leverage in these businesses...so the business will build a new warehouse, the stock will drop 75%, top-line is growing 50%/year, and then the stock 10x when operating leverage comes through). I think profitability is a sign that your business works. The "first-mover" advantage is way, way, way overstated. Investing is growth is great, but some businesses are clearly investing in growth that is unprofitable (one interesting example here is NFLX, they generate a profit in accounting terms but it is pretty clear that their business is either not profitable or taking on massive risk for marginal profit).
  - scarface74 5y ago
    I can’t find it now. But I can swear I read that Amazon was lucky enough to get a line of credit right before the dot com bust. But Amazon wasn’t profitable. It used cash flow from the time it received money from customers and paid suppliers to grow.