9 ms·

Getting to profitability isn't as noteworthy (from a startup POV) as raising an A-round from working 4 days a week.

by pclark 14y ago

drewmclellan 14y ago
Which in itself is sad. Profitability, providing employment, and creating a better quality of life for all those involved. Funding is great, but the above sounds like a better measure of success to me.
- tomgallard 14y ago
  after all funding is just a way of saying 'we persuaded some people to lend us some money'. (I know- equity finance is different in some respects) Is 'the Bank just lent us $ million' as impressive as 'we reached profitability? It certainly shouldn't be.
StavrosK 14y ago
To whom? I'm just a regular guy and I'm not impressed at all by raising money, I've seen utterly incompetent people do it. I am supremely impressed by someone getting 10k paying customers.
- judofyr 14y ago
  > (from a startup POV)
  - StavrosK 14y ago
    Sorry, I'm a regular startup guy, having just started (co-founded) my own a few months ago.
    - TapaJob 14y ago
      "Getting to profitability isn't as noteworthy (from a startup POV) as raising an A-round from working 4 days a week." What we have found here in the UK, is without profitability, raising an A-round is near enough impossible. The UK Start-up/Inventment scene is still very much in it's infancy and investors are reluctant to give sums anywhere near the figure Ryan has quoted without a 'profitable' business. Well done to the team for creating a fantastic service all whilst spending time with family, highly commendable!
- lusr 14y ago
  Then I have a great business proposition for you! It's easy... for the past month we hung around a street corner and for everybody who paid us $1 we gave them $1 back with a SMILE! We've done this with 10K paying customers so far! We also sold a packet of sweets worth $1 to my aunt for $2; she's always had a soft spot for me. We're profitable! :D I believe in my product so much I haven't even taken a salary, amazing huh?! And I believe with a $10 million investment we can scale this to 10 million paying customers within 1 year! Wanna invest?! [Oh and in year 2 I'm taking a $10 million salary.] I'm obviously being facetious and while I don't want to be "that guy" dismissing what appears to be a very respectable business, mentioning revenue & customer numbers without mentioning profit values or percentages irks me. This is probably because of 8 seasons of Dragon's Den and 3 seasons of Shark Tank that have impressed upon me just how few people understand that a large turnover means nothing; "turnover is vanity; profit is sanity". It's not easy to achieve a large turnover, sure, but it's also meaningless unless it is associated with a reasonable net profit. Having read through a few more comments I suspect the author's business is probably turning a decent net profit, but, nevertheless, the post seems incomplete without this data or at least some form of confirmation (e.g. "our net profit is between 10-20%").
  - StavrosK 14y ago
    Yes, profit is the thing that impresses me even more than paying users. We're talking about investment vs users as a metric, not investment vs anything else.
    - lusr 14y ago
      I don't follow? What is the meaning of "investment vs users"? Surely "# users" as a metric only makes sense within a specific business model that ultimately resolves down to a figure of "profit/user", which reinforces my point that discussing revenue, users and investment without the final part of the equation - expenses & profit - is an incomplete discussion. With any equation you can come up with huge numbers for any of the terms but if you don't reveal all the terms you cannot determine the profit - what is the value of the discussion in that case? EDIT: On HackerNews, a place for entrepreneurs and consequently the presumably financially literate, I'm being downvoted for pointing out that terms are missing from the profit & loss equation being presented, with nobody stepping up to explain why there's something wrong with my criticism?
raverbashing 14y ago
Humm... no Profitability is more important. There are examples to the contrary (Tumblr, Pinterest, Instagram, etc) but if you're profitable this means you are providing a worthy service (unless you're in the 'Nigerian Prince' business), and people are willing to pay you! Never underestimate the power of people actually paying you.
- pclark 14y ago
  Why does every Hacker News post involving venture financing have to have a discussion about how "companies should focus on making revenue"? this never used to happen as frequently.
  - samstave 14y ago
    Let's call it "Bubble Froth" - the excitement and frenzy the startup community has around financing and funding. "Tiny bubbles... In the whine..."
- csallen 14y ago
  Well, for one, he isn't saying that fundraising is more important. Just that in Startup Land, the culture seems to find it more "noteworthy". For better or for worse, that seems to be the case. As for the age-old debate of profitability vs fundraising, it's not a black and white issue. And I don't know why people so often feel the need to try and turn it into one. Profitability is great. You're right -- it's a signal that you're providing a valuable service. But as you pointed out, there are many examples to the contrary, and rightly-so: because achieving profitability is not the only way to build a valuable business. And even for companies who do focus on charging customers rather than, say, getting tons of users, raising money is often an important step on the path to eventual success.
  - tomgallard 14y ago
    I disagree. It is not possible to build a valuable business without achieving profitability. Over a long-enough time period, the value of a non-profitable business will revert to zero. If a business is valuable, it is because the market (or investors) believe either a.) It is going to make profits at some point in the future. b.) It is going to be an attractive acquisition for another company (who are presumably only going to buy it if they believe it will enhance their long term profitability). Of course there is c.) , which is when investors buy into something because they believe someone else will come and buy it off them in the future for a greater amount of money. If we've reached this point, it is a sure sign of a bubble (cf Tulip fever in the Netherlands).
pemulis 14y ago
I think that the two items are related, though. Could they have raised an A-round working just four days a week on a startup that was not profitable? I doubt it. If anyone knows of any cases where that happened, though, I'd be interested in seeing them.
j45 14y ago
A startup that gets to the same place without funding isn't noteworthy?
- Terretta 14y ago
  As the only CDN / video delivery network to bootstrap and stick around for a decade without funding, I'd say it's usually not considered noteworthy. Tech press looks at funding and the stable of investors as validation that a company is worth covering. "How much money have you taken?" and "Who are your investors?" seem to rank above covering how the tech works or if it's unique, both for journalists and for prospective acquirers.
rdl 14y ago
That's true -- entrepreneurs are faster to adapt than VCs. I guess because VCs don't have good metrics for intermediate stages toward success, and "how long are you in the office each week" is something they use.
Johngibb 14y ago
I think the point is that working 4 days a week didn't preclude them from raising money from investors. Not that funding is the key metric, but to show working extremely long hours isn't a pre requisite to raising money.

Getting to profitability isn't as noteworthy (from a startup POV) as raising an A-round from working 4 days a week.

by pclark 14y ago

Getting to profitability isn't as noteworthy (from a startup POV) as raising an A-round from working 4 days a week.

Which in itself is sad. Profitability, providing employment, and creating a better quality of life for all those involved. Funding is great, but the above sounds like a better measure of success to me.

tomgallard 14y ago
after all funding is just a way of saying 'we persuaded some people to lend us some money'. (I know- equity finance is different in some respects) Is 'the Bank just lent us $ million' as impressive as 'we reached profitability? It certainly shouldn't be.

StavrosK 14y ago

To whom? I'm just a regular guy and I'm not impressed at all by raising money, I've seen utterly incompetent people do it. I am supremely impressed by someone getting 10k paying customers.

judofyr 14y ago
> (from a startup POV)
- StavrosK 14y ago
  Sorry, I'm a regular startup guy, having just started (co-founded) my own a few months ago.
  - TapaJob 14y ago
    "Getting to profitability isn't as noteworthy (from a startup POV) as raising an A-round from working 4 days a week." What we have found here in the UK, is without profitability, raising an A-round is near enough impossible. The UK Start-up/Inventment scene is still very much in it's infancy and investors are reluctant to give sums anywhere near the figure Ryan has quoted without a 'profitable' business. Well done to the team for creating a fantastic service all whilst spending time with family, highly commendable!
lusr 14y ago
Then I have a great business proposition for you! It's easy... for the past month we hung around a street corner and for everybody who paid us $1 we gave them $1 back with a SMILE! We've done this with 10K paying customers so far! We also sold a packet of sweets worth $1 to my aunt for $2; she's always had a soft spot for me. We're profitable! :D I believe in my product so much I haven't even taken a salary, amazing huh?! And I believe with a $10 million investment we can scale this to 10 million paying customers within 1 year! Wanna invest?! [Oh and in year 2 I'm taking a $10 million salary.] I'm obviously being facetious and while I don't want to be "that guy" dismissing what appears to be a very respectable business, mentioning revenue & customer numbers without mentioning profit values or percentages irks me. This is probably because of 8 seasons of Dragon's Den and 3 seasons of Shark Tank that have impressed upon me just how few people understand that a large turnover means nothing; "turnover is vanity; profit is sanity". It's not easy to achieve a large turnover, sure, but it's also meaningless unless it is associated with a reasonable net profit. Having read through a few more comments I suspect the author's business is probably turning a decent net profit, but, nevertheless, the post seems incomplete without this data or at least some form of confirmation (e.g. "our net profit is between 10-20%").
- StavrosK 14y ago
  Yes, profit is the thing that impresses me even more than paying users. We're talking about investment vs users as a metric, not investment vs anything else.
  - lusr 14y ago
    I don't follow? What is the meaning of "investment vs users"? Surely "# users" as a metric only makes sense within a specific business model that ultimately resolves down to a figure of "profit/user", which reinforces my point that discussing revenue, users and investment without the final part of the equation - expenses & profit - is an incomplete discussion. With any equation you can come up with huge numbers for any of the terms but if you don't reveal all the terms you cannot determine the profit - what is the value of the discussion in that case? EDIT: On HackerNews, a place for entrepreneurs and consequently the presumably financially literate, I'm being downvoted for pointing out that terms are missing from the profit & loss equation being presented, with nobody stepping up to explain why there's something wrong with my criticism?

raverbashing 14y ago

Humm... no Profitability is more important. There are examples to the contrary (Tumblr, Pinterest, Instagram, etc) but if you're profitable this means you are providing a worthy service (unless you're in the 'Nigerian Prince' business), and people are willing to pay you! Never underestimate the power of people actually paying you.

pclark 14y ago
Why does every Hacker News post involving venture financing have to have a discussion about how "companies should focus on making revenue"? this never used to happen as frequently.
- samstave 14y ago
  Let's call it "Bubble Froth" - the excitement and frenzy the startup community has around financing and funding. "Tiny bubbles... In the whine..."
csallen 14y ago
Well, for one, he isn't saying that fundraising is more important. Just that in Startup Land, the culture seems to find it more "noteworthy". For better or for worse, that seems to be the case. As for the age-old debate of profitability vs fundraising, it's not a black and white issue. And I don't know why people so often feel the need to try and turn it into one. Profitability is great. You're right -- it's a signal that you're providing a valuable service. But as you pointed out, there are many examples to the contrary, and rightly-so: because achieving profitability is not the only way to build a valuable business. And even for companies who do focus on charging customers rather than, say, getting tons of users, raising money is often an important step on the path to eventual success.
- tomgallard 14y ago
  I disagree. It is not possible to build a valuable business without achieving profitability. Over a long-enough time period, the value of a non-profitable business will revert to zero. If a business is valuable, it is because the market (or investors) believe either a.) It is going to make profits at some point in the future. b.) It is going to be an attractive acquisition for another company (who are presumably only going to buy it if they believe it will enhance their long term profitability). Of course there is c.) , which is when investors buy into something because they believe someone else will come and buy it off them in the future for a greater amount of money. If we've reached this point, it is a sure sign of a bubble (cf Tulip fever in the Netherlands).

pemulis 14y ago

I think that the two items are related, though. Could they have raised an A-round working just four days a week on a startup that was not profitable? I doubt it. If anyone knows of any cases where that happened, though, I'd be interested in seeing them.

j45 14y ago

A startup that gets to the same place without funding isn't noteworthy?

Terretta 14y ago
As the only CDN / video delivery network to bootstrap and stick around for a decade without funding, I'd say it's usually not considered noteworthy. Tech press looks at funding and the stable of investors as validation that a company is worth covering. "How much money have you taken?" and "Who are your investors?" seem to rank above covering how the tech works or if it's unique, both for journalists and for prospective acquirers.

rdl 14y ago

That's true -- entrepreneurs are faster to adapt than VCs. I guess because VCs don't have good metrics for intermediate stages toward success, and "how long are you in the office each week" is something they use.

Johngibb 14y ago

I think the point is that working 4 days a week didn't preclude them from raising money from investors. Not that funding is the key metric, but to show working extremely long hours isn't a pre requisite to raising money.