4 ms·
What's the point of being vc funded and profitable? By definition if you are profitable you don't need external capital to exist and thus don't need vc money
by polote 4y ago
What's the point of being vc funded and profitable?
By definition if you are profitable you don't need external capital to exist and thus don't need vc money
- ajkjk 4y agoI imagine it is not too different from borrowing against your profitability in order to grow faster.
- alpha_squared 4y agoA sibling comment touched on it, but I want to expand a little bit on that. Given two companies competing on the same problem, where one is profitable and one isn't, which is likely to come out on top? I'd argue it's the one that brings in the most money (via profits + funding). At early stages, funding will almost always be greater than profits. A profitable company that does not seek investment will eventually lose out to an unprofitable one that has funding because it will grow faster. At some point, the larger company will seek to optimize for profit, acquire the profitable company, or become the default company for the problem space (a near-monopoly). The sad state of current affairs is that the market is optimized to promote dominance, not capital efficiency.
- lostcolony 4y agoAnd with that changing, maybe we can have winners who make better products, or are more efficient with resources, or just...listen to their customers. Rather than merely being better at attracting VC capital. One can hope.
- toss1 4y agoYou don't need the extra VC money, but often financing can get you to the point of addressing a far larger market far sooner. IF (big "IF") that more rapid growth is critical in your market segment, such as to obtain a better defensible moat by having far larger market share sooner, then VC can be a very good tradeoff. But if that is not your market dynamics, maintaining your freedom and growing organically can be best.
- oaw-bct-ar-bamf 4y agoDifferent take on my sibling commenter: When VC has the choice to invest in two startups. Both on par, the one is already profitable, the other burning money, which company to invest in seems clear…
- dehrmann 4y agoIt's just a question of natty or juice. There are also business models that legitimately need to reach moderate scale before they're viable.