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What is the point of growth if you can't make a successful business? Legitimate question here. I always had a hard time understanding, especially in regards to

What is the point of growth if you can't make a successful business? Legitimate question here. I always had a hard time understanding, especially in regards to companies that are still not profitable or just barely after 10 to 20 years. Seems incredibly risky and not strong enough to weather any economic downturn. Are companies just copying the Facebook mantra from 2005ish? Didn't FB become immediately profitable once they started selling ads? That was pre ipo.

roflyear 4y ago
Yeah but you're changing the subject. Obviously if the business is garbage it is garbage. I'm not saying these businesses are good. I'm just saying you absolutely cannot make a blanket statement like "valued at 72x rev is bullshit" if my business is growing even 2-3x a year, it could be ok. In a few years (6-7) if I keep that up my revenue will outpace even my original valuation. It means nothing to look at revenue and valuation alone.
hackernewds 4y ago
You could argue the opposite. what's the point of great margins if you have no scale? look at the Amazon example. they were unprofitable for a very very long time. and the retail business is still very miniscule margins
- Apocryphon 4y ago
  Isn't the Amazon the exception that proves the rule
- throwaway0a5e 4y ago
  Amazon never made any profit because they were always reinvesting. If they had scaled back to "normal business" levels of ambition at any point they'd have been "normal business" levels of profitable.
- swatcoder 4y ago
  > what's the point of great margins if you have no scale Profit? Niche ownership? Reliability? Durability? Expertise? It makes sense to worship the Church of Scale in a VC-adjacent forum like HN, but it’s not the only way to business.
- scarface74 4y ago
  Please don’t use the “look at Amazon” example. Amazon had positive margins early on and was using cash to buy and build real assets. Amazon also pivoted to an entirely different business where most of its profit comes from - AWS. No, AWS wasn’t born from Amazon selling excess capacity. That’s just like saying that if every company rehired its first CEO it could be worth multiple trillions.
- mupuff1234 4y ago
  The point of profit is profit. The whole premise of the VC/PE business is profits, just with different risk strategies.
  - rchaud 4y ago
    Profit for who? All VCs want is for the company to IPO, because that's when they can get their money back with a nice profit. The company itself doesn't have to be anywhere near profitability to IPO. Look at Uber, Airbnb, Dropbox, etc.
  - scarface74 4y ago
    VCs don’t care about profit. They only care about selling to the “greater fool” at unrealistic valuations.
    - deleted 4y ago
      [deleted]
bko 4y ago
Facebook has insane growth, even today. It had double digit revenue growth for over a decade. For instance, in 2021, their revenue grew 35%, the year before, 20%. You'll see similar numbers if you look at their MAU and DAU. With that kind of growth over a decade, pretty much any valuation is cheap today. Sacrificing even a little growth for revenue today is a bad tradeoff because of compounding effects. https://www.statista.com/statistics/268604/annual-revenue-of-facebook/ https://www.statista.com/statistics/268604/annual-revenue-of...
- slater 4y ago
  And what's their profit for that decade+?
  - ZephyrBlu 4y ago
    A shit ton: https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/ https://www.statista.com/statistics/277229/facebooks-annual-...
  - bko 4y ago
    Similar growth in percentage terms (more actually as they're getting more efficient as they scale and have more user data). Pretty much all facebook numbers are up and to the right. https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/ https://www.statista.com/statistics/277229/facebooks-annual-...
mym1990 4y ago
I think the 'successful business' part has become less relevant for investors that are just looking to exit sooner than later. The business model for many apps has become: make a product > obtain users > get hype > IPO > exit. At the exit portion, the product gets littered with ads, competition starts to catch up, and the product begins to decline. Obviously this is pretty reductive but this is generally what I have seen as a user of many apps in the past 10 years.
deleted 4y ago
[deleted]
willcipriano 4y ago
> What is the point of growth if you can't make a successful business? Ideally? To leave retail investors and pension funds holding the bag when it all blows up.

roflyear 4y ago

Yeah but you're changing the subject. Obviously if the business is garbage it is garbage. I'm not saying these businesses are good. I'm just saying you absolutely cannot make a blanket statement like "valued at 72x rev is bullshit" if my business is growing even 2-3x a year, it could be ok. In a few years (6-7) if I keep that up my revenue will outpace even my original valuation. It means nothing to look at revenue and valuation alone.

hackernewds 4y ago

You could argue the opposite. what's the point of great margins if you have no scale? look at the Amazon example. they were unprofitable for a very very long time. and the retail business is still very miniscule margins

Apocryphon 4y ago
Isn't the Amazon the exception that proves the rule
throwaway0a5e 4y ago
Amazon never made any profit because they were always reinvesting. If they had scaled back to "normal business" levels of ambition at any point they'd have been "normal business" levels of profitable.
swatcoder 4y ago
> what's the point of great margins if you have no scale Profit? Niche ownership? Reliability? Durability? Expertise? It makes sense to worship the Church of Scale in a VC-adjacent forum like HN, but it’s not the only way to business.
scarface74 4y ago
Please don’t use the “look at Amazon” example. Amazon had positive margins early on and was using cash to buy and build real assets. Amazon also pivoted to an entirely different business where most of its profit comes from - AWS. No, AWS wasn’t born from Amazon selling excess capacity. That’s just like saying that if every company rehired its first CEO it could be worth multiple trillions.
mupuff1234 4y ago
The point of profit is profit. The whole premise of the VC/PE business is profits, just with different risk strategies.
- rchaud 4y ago
  Profit for who? All VCs want is for the company to IPO, because that's when they can get their money back with a nice profit. The company itself doesn't have to be anywhere near profitability to IPO. Look at Uber, Airbnb, Dropbox, etc.
- scarface74 4y ago
  VCs don’t care about profit. They only care about selling to the “greater fool” at unrealistic valuations.
  - deleted 4y ago
    [deleted]

bko 4y ago

Facebook has insane growth, even today. It had double digit revenue growth for over a decade. For instance, in 2021, their revenue grew 35%, the year before, 20%. You'll see similar numbers if you look at their MAU and DAU. With that kind of growth over a decade, pretty much any valuation is cheap today. Sacrificing even a little growth for revenue today is a bad tradeoff because of compounding effects. https://www.statista.com/statistics/268604/annual-revenue-of-facebook/ https://www.statista.com/statistics/268604/annual-revenue-of...

slater 4y ago
And what's their profit for that decade+?
- ZephyrBlu 4y ago
  A shit ton: https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/ https://www.statista.com/statistics/277229/facebooks-annual-...
- bko 4y ago
  Similar growth in percentage terms (more actually as they're getting more efficient as they scale and have more user data). Pretty much all facebook numbers are up and to the right. https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/ https://www.statista.com/statistics/277229/facebooks-annual-...

mym1990 4y ago

I think the 'successful business' part has become less relevant for investors that are just looking to exit sooner than later. The business model for many apps has become: make a product > obtain users > get hype > IPO > exit. At the exit portion, the product gets littered with ads, competition starts to catch up, and the product begins to decline. Obviously this is pretty reductive but this is generally what I have seen as a user of many apps in the past 10 years.

deleted 4y ago

[deleted]

willcipriano 4y ago

> What is the point of growth if you can't make a successful business? Ideally? To leave retail investors and pension funds holding the bag when it all blows up.