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Especially companies which claim to have solid runway blaming "the macro environment" is perplexing. But then, venture capital backed companies generally (argu
by klardotsh 4y ago
Especially companies which claim to have solid runway blaming "the macro environment" is perplexing.
But then, venture capital backed companies generally (arguably by design) are not profitable, so their ability to weather storms is likely weakened and maybe the boards get squirrely when faced with the threat of bad weather.
- singron 4y agoPromising but pre-profit VC-backed companies don't want to raise in the next 2-3 years since there is a huge risk of down-rounds. Everyone is trying to squeeze their runways out over that time period. Unfortunately, if your customers are mostly other tech companies, they are doing the same thing. It seems like a bunch of healthy companies are putting on the brakes hard enough to collectively cause the recession they are trying to avoid.
- endorphine 4y ago> But then, venture capital backed companies generally (arguably by design) are not profitable I've heard this before but I don't get it. Why are they not profitable "by design"? Edit: not sure if it was the reason this is downvoted but this was an honest question
- jiveturkey 4y agoThey spend every cent (and then some) on growth. The model is to capture the market. You have to spend to do that. Once you do that, you can set the terms. Also, it happens to bring growth company valuations and a nice exit. What happens after that (ie if the entire thing was unsustainable), honey badger VC don't care. You also don't have a choice but to play the game. If you don't, your VC funded competition will outspend and destroy you.
- endorphine 4y agoThanks for this clear explanation.
- karolist 4y agoBecause growth is prioritized over profit in hopes of an exit. Built for exit startup economy.