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Problem is if venture capital is valuing companies as a multiple of revenue then management has an incentive to juice revenue right now because every dollar of
by thisismyusrname 4y ago
Problem is if venture capital is valuing companies as a multiple of revenue then management has an incentive to juice revenue right now because every dollar of revenue will increase the value of their stock by that multiple which is (1) often quite high (10-40) and (2) likely a more profitable strategy for management than the incremental cost of annoyed customers.
Not to say this sales structure isn’t good. It sounds good. I’m just not sure it changes one of the biggest incentives to aggressively sell with a shorter term time horizon than some subset of shareholders might have.
- notahacker 4y agoI guess the tradeoff is that underselling allows you to juice your CLV estimates even more with inflated upsell figures. From a purely cynical perspective, which is best probably depends on the market and maturity of the business and cost of sale: can you tell more convincing stories about ability to keep doubling the number of new customers walking through the door like you did over the last few months, or how your product is so good larger customers are going to keep doubling their spend every few months like most of them did recently...