4 ms·

isn't there a time when a company should stop growing via venture funding and start re-investing it's own profits? you know, like a sustainable company? how to

by franze 15y ago

isn't there a time when a company should stop growing via venture funding and start re-investing it's own profits? you know, like a sustainable company? how to determine when this points has come? (i thought yammer was already far beyond that point)

ericdykstra 15y ago
When a company wants to grow faster than current revenue will let them, they take outside money. Maybe with this new money they will increase their burn to take on more employees and increase revenue and customer base more quickly? Maybe their is some strategic position taken with the current round. There are many reasons why a company would raise money when they could be profitable right now. And we don't even know that they are, or are in a position to be.
verelo 15y ago
Yeah, i dont know a bunch about how funding works...but i used to love playing "Transport tycoon" as a kid. Borrowing from the bank was how we got funding back then, which meant eventually you had to pay it back...i guess i just have a bit to learn?
wavephorm 15y ago
What I can't comprehend is how any VC's are still dumb enough to invest old-school ICQ/AIM clones. They never go anywhere or make any money. When we're living in a world where I can spin up a NodeJS chat server in an afternoon there really is no pot of gold here.
- le_isms 15y ago
  Yammer isn't a ICQ/AIM clone, if anything it's a Facebook clone for businesses.
  - funkah 15y ago
    Huh. I saw it as more of a Twitter clone for businesses, that allows you to say things that would be too sensitive to say on Twitter. My workplace used it briefly, but has switched to Socialtext. Maybe it has changed in the meantime. I'll admit it is pretty surprising to me that they're still around.
    - RandallBrown 15y ago
      it's sort of a clone of both. The interface is almost an exactly clone of the facebook UI from 2010, but the functionality is much more like twitter.
jim-greer 15y ago
In many cases a round of this size is like a 'private IPO' and provides some liquidity for founders or even early employees. This quote suggest that may be the case here: <quote>The new funding “is like an IPO without the headaches,” he said, adding that the start-up can now “stay private for quite some time.”</quote>
- joering2 15y ago
  Someone may need to correct me here, but why would there be a pressure to go IPO? plenty of companies stay out of public market (in private hands), remain strong, build brand, bring profits, etc. IF they havent brought strong numbers already, what would make anyone sure another $85 mil will?
  - patio11 15y ago
    There is strong pressure to IPO because that is a liquidity event (opportunity to turn ownership into money) for investors. The other option is acquisition. Recently, IPOs are hard, for a combination of regulatory and market reasons. One could imagine a hypothetical world where profits paid as dividends to owners would suffice to give investors the return their business model requires but that is very much not standard practice in the US tech industry. To a professional investor (especially a VC firm), a profitable company that cannot be sold/IPOed is a failure.
kenrikm 15y ago
Anyone ever play SimCity? if you don't keep a good balance between growth/revenue bad things happen, I don't see why that same concept does not apply to startups. Now I have not seen their revenue numbers but I would think that they must be relatively good or they would not have been able to raise such a large round. Unless this is just to keep operating and in that case things would not be going so well for them.

by franze 15y ago

ericdykstra 15y ago

When a company wants to grow faster than current revenue will let them, they take outside money. Maybe with this new money they will increase their burn to take on more employees and increase revenue and customer base more quickly? Maybe their is some strategic position taken with the current round. There are many reasons why a company would raise money when they could be profitable right now. And we don't even know that they are, or are in a position to be.

verelo 15y ago

Yeah, i dont know a bunch about how funding works...but i used to love playing "Transport tycoon" as a kid. Borrowing from the bank was how we got funding back then, which meant eventually you had to pay it back...i guess i just have a bit to learn?

wavephorm 15y ago

What I can't comprehend is how any VC's are still dumb enough to invest old-school ICQ/AIM clones. They never go anywhere or make any money. When we're living in a world where I can spin up a NodeJS chat server in an afternoon there really is no pot of gold here.

le_isms 15y ago
Yammer isn't a ICQ/AIM clone, if anything it's a Facebook clone for businesses.
- funkah 15y ago
  Huh. I saw it as more of a Twitter clone for businesses, that allows you to say things that would be too sensitive to say on Twitter. My workplace used it briefly, but has switched to Socialtext. Maybe it has changed in the meantime. I'll admit it is pretty surprising to me that they're still around.
  - RandallBrown 15y ago
    it's sort of a clone of both. The interface is almost an exactly clone of the facebook UI from 2010, but the functionality is much more like twitter.

jim-greer 15y ago

In many cases a round of this size is like a 'private IPO' and provides some liquidity for founders or even early employees. This quote suggest that may be the case here: <quote>The new funding “is like an IPO without the headaches,” he said, adding that the start-up can now “stay private for quite some time.”</quote>

joering2 15y ago
Someone may need to correct me here, but why would there be a pressure to go IPO? plenty of companies stay out of public market (in private hands), remain strong, build brand, bring profits, etc. IF they havent brought strong numbers already, what would make anyone sure another $85 mil will?
- patio11 15y ago
  There is strong pressure to IPO because that is a liquidity event (opportunity to turn ownership into money) for investors. The other option is acquisition. Recently, IPOs are hard, for a combination of regulatory and market reasons. One could imagine a hypothetical world where profits paid as dividends to owners would suffice to give investors the return their business model requires but that is very much not standard practice in the US tech industry. To a professional investor (especially a VC firm), a profitable company that cannot be sold/IPOed is a failure.

kenrikm 15y ago

Anyone ever play SimCity? if you don't keep a good balance between growth/revenue bad things happen, I don't see why that same concept does not apply to startups. Now I have not seen their revenue numbers but I would think that they must be relatively good or they would not have been able to raise such a large round. Unless this is just to keep operating and in that case things would not be going so well for them.