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Excellent, balanced post. We’re at the end of a grand experiment of “you can take VC money and deliver a tech with new values, one that people want.” The only

Excellent, balanced post. We’re at the end of a grand experiment of “you can take VC money and deliver a tech with new values, one that people want.” The only people still claiming you can just haven’t run out of their last funding round… yet. We have 20 years of evidence on what tech businesses can be built on the Internet that make money. It’s narrow and mostly can’t solve the problems that remain. The escape hatch is always subscription revenue. It’s true you can build a unique business on unique values for a unique community. But it’s a long slog in the MicroSaaS world where anyone can & many will straight up copy you - forever. X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not. This might seem a negative outlook, but it could be quite positive if founders know & accept it. The secret is out now that, mostly, founders make the same amount of money in the same amount of time whether they go the VC or bootstrapped route (when it’s a winning business). There will always be opportunities for finance-backed cartel-busting mega runs. But if you are a founder that cares about anything - anything - the route that gets you there is founder control, patience, and a customer base that pays.

skybrian 3y ago
The founders themselves could also lose interest over the years if the website isn't as popular as they hoped, and it's still a slog.
- aleph_minus_one 3y ago
  > The founders themselves could also lose interest over the years if the website isn't as popular as they hoped, and it's still a slog. Rather: the founders are lying and deceiving if they talk about their great vision and its importance for mankind, if in reality they are just looking for popularity, and are eschewing the slog.
  - skybrian 3y ago
    That's one scenario. There are others.
dopeboy 3y ago
> We’re at the end of a grand experiment of “you can take VC money and deliver a tech with new values, one that people want.” This is an extreme position. More likely, we are seeing repricing occur. There are still worthy, venture backable ideas. Probably less of them than in the past.
MichaelZuo 3y ago
“you can take VC money and deliver a tech with new values, one that people want.” Well you can... just that there's no guarantee that the 'people who want' will also want to pay enough, on average, for it to be sustainable.
Aeolun 3y ago
> X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not. Twitter could. MuskX can not.
- FormerBandmate 3y ago
  Twitter Blue was a total flop before Musk. I'd bet Twitter's subscription revenue has grown astronomically (although not nearly enough to make up for $1.3 billion in stupid debt payments and a $3 billion shortfall in advertising revenue)
  - dghlsakjg 3y ago
    Twitter blue was launched less than six months before Elon started his takeover bid. It’s hard to call a six month old niche product a flop. I’d bet that subscription revenue has grown astronomically because the business strategy pre Musk was advertising based instead of subscription based. He destroyed the advertising business, and is trying to make subscriptions work.
FormerBandmate 3y ago
YouTube and Hulu did it very successfully. Twitter has just done it in a really stupid way, because their management values politics over the actual business of running a social media platform (moreso now than before, but still very much before)
- deleted 3y ago
  [deleted]
- DeathArrow 3y ago
  X switches to subscription exactly because politics forces them to, by trying to scare and shame advertisers. Once subscription revenue is enough, scare and shame won't work and politics won't have anything to do with the future of the business.
  - moomin 3y ago
    I’m not sure you understand what advertising cares about. They care about reach and brand value, both of which have dropped for Twitter. “Politics” is a component of brand value, but it’s got nothing to do with reach, which is falling through the floor. But equally “politics” doesn’t explain the drip in brand value, either. The FIFA World Cup has _dreadful_ politics, advertisers don’t care because it’s still a great brand with a huge reach. Musk is rich and connected enough to be able to ignore commercial reality for a basically unlimited amount of time, but I seem to recall you were arguing elsewhere on this thread that company owners should only care about the money a company makes.
    - DeathArrow 3y ago
      > “Politics” is a component of brand value, but it’s got nothing to do with reach, which is falling through the floor. I think reach was falling because of political pressure. > I seem to recall you were arguing elsewhere on this thread that company owners should only care about the money a company makes. I was arguing that the goal of a company is to generate profit. That should be the goal. If business owners do that or don't, it's up to them. And I am not arguing that Musk does a good thing if he doesn't have the profit as the objective.
bko 3y ago
Why can't you take VC money and run the business the way you want? They can't force you to do anything. Sure they can pressure you, but if you have ownership and they have a minority stake, you can do what you want. Ello could have stopped at any time. Why did they raise 5 million only 6 months after their first round and another 5 million 6 months after that? What were they spending their money on? I don't see how this would have worked if they hadn't taken money > X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not. I don't know. X showed that you can fire ~80% of your employees and the product could still exist. Not only exist but push product at a faster pace. In the last year you got editable comments, subscriptions, revenue sharing, blue checkmark for sale, alternative check marks for govts and org, culling of old accounts, API restrictions, forcing people to put parody identify themselves, longer videos, just to name a few off the top of my head. I noticed more large changes in the last year than the last 5. You don't need a lot of people to run a SaaS company and you can cut a lot of bullshit. And all tech companies are coming around to that conclusion. Maybe if Ello had raised only a few million and kept around a dozen employees or so, it could have succeeded.
- bruce511 3y ago
  >> Why can't you take VC money and run the business the way you want? Because taking VC money let's you defer the revenue question. And by deferring it, you then have to bait-and-switch the users. Let me be clear. It's OK to get startup money. Businesses need capital to get going. But revenue should be the original business plan. In other words, who is paying for this site, and how? Ello ruled out advertising and data sale - that's fine, but that leaves subscriptions, donations, premium features, whatever. For a "regular" business, each wants to become sustainable, its important to become profitable ASAP. The team is focused on revenue, keeping costs down and so on. Once it can pay expenses and salaries it can run forever. The obvious revenue here is subscriptions. Income rises with expenses. But of course if you charge you'll grow slowly. So you start free, which means customers will rebel later. (Anyone see parallels to Open Source companies here?) VC money allows you to kick this can down the road. Small angel investment? Sure, no problem. You still have majority control. But if you are using that money to pay salaries, then it'll quickly run out. If you don't have enough revenue, you could just close up, but you dont, you go get a series A. Then B. Then C and so on. The implication is you are selling equity. One day that investor equity exceeds 25%. A round or two later it's over 50%. You've lost control. (And I'm assuming all the founders are in agreement all the time - in reality one wants to cash out, and joins the investors camp well before the 50% is reached.) So, you can grow slowly, and sustainably. Or you can take money, grow fast, and "hope". But make no mistake, when you sell -equity- you are selling control. You are selling your right to dictate "principles". That is -what- you are selling-. Since you are selling to people who are in it for the financial return, the end result is like night following day; inescapable. If you want to build a business on principles, not profit, you HAVE to answer the revenue question first.
throwaway167 3y ago
Few web businesses have a truly huge minimum efficient scale. For those that do, it's huge. For those that don't, it's quite small. And for the small ones, Wordpress or similar powers their laundromat. A good small business. As you say, one that takes effort to run. Stripes the banks POS, perhaps someone has some mid scale in Tide sales in the middleware SaaS, there can be a franchise that doesn't fully adapt to how many socks Vs fur local customers have. But think laundromat. Local restaurant. Which are fine businesses.
DeathArrow 3y ago
>The secret is out now that, mostly, founders make the same amount of money in the same amount of time whether they go the VC or bootstrapped route (when it’s a winning business). I pretty much doubt it is the same amount of time. And I doubt the same percent of businesses survive nevermind win.
DeathArrow 3y ago
>But if you are a founder that cares about anything - anything - the route that gets you there is founder control, patience, and a customer base that pays. Most successful founders, from Edison to Gates and Bezos went in the business to make money, not to change the world. Changing the world for better or for worse is mostly a side effect. The goal of a business is profit, not ideology.
- moomin 3y ago
  You’re all over this thread but I think you need to read it a bit more carefully. There’s no reference to any belief system in the post you’re replying to, there’s an assertion about expected profit and control. You can disagree with that assertion, and indeed have on another thread, but within the context of the assertion the poster is correct. I think you’re wrong to even think this is about “ideology”, which is presumably a set of beliefs you are against. It applies as much to _variance_, which 100% is something a founder should care about.
  - DeathArrow 3y ago
    The post I replied to, was talking about founders that care about anything. As opposed to founders that do not care and are in it just for the money. That's how I read it and you have the right to disagree. That's why we are on a discussion forum. To share ideas and speak our minds freely, regardless if we agree or not. I hope you have fun tracking and counting my posts and it represents a good spending of your time.
    - nrb 3y ago
      I read it as: this advice applies universally, as in any space you are passionate about.
- danjac 3y ago
  How much profit does Amazon make these days again?
  - 3y ago
eterevsky 3y ago
I think Substack is a pretty clear example of subscription model working well. There's also Patreon that is doing very well. I wouldn't discount YouTube Premium and Twitter subscriptions. They don't cover the majority of users, but are a viable option if you (like me) can't tolerate ads.
- helsinkiandrew 3y ago
  They're both companies that help others monetize their content, Substack is still quite small and Patreon has stumbled a bit recently trying to justify it size and value: https://finance.yahoo.com/news/patreons-valuation-dropped-70-last-140136284.html https://finance.yahoo.com/news/patreons-valuation-dropped-70...
- nonameiguess 3y ago
  Substack and Patreon both largely work because the top producers there got popular somewhere else first and then brought a large audience with them. It's not clear if a creator economy consisting entirely or primarily of platforms like this would be possible. Hell, at least at first, Ello even tried this same technique. It was meant to be an online gathering place for pre-existing communities of artists who already knew each other from elsewhere. Even Facebook did this at first, too, automatically placing people into networks for their universities, assuming they would already know many of the other users from class. Ello required personal invitations whereas Facebook required a .edu e-mail address to register. The fundamental problem here is all the value is in the network itself, not the platform. The fact that the network is largely on Facebook is as much a matter of chance and historical inertia as it is anything Facebook did well as a company or a technology. Likewise, I don't know that Substack did anything particularly repeatable to snag people like Andrew Sullivan and Glenn Greenwald right as traditional publishers tanked. They just happened to be in the right place at the right time. It's not like there is no precedent. Film studios and record companies have more or less always operated this way. All of the value of their products is created by the artists, not by the company. The only way for them to moat any of it is signing artists to exclusive contracts before they get big enough to have real negotiating power. But web platforms don't want to think of themselves as another MGM studios. They want to be 1950s Ford but with near-zero marginal cost of goods sold.
LoveMortuus 3y ago
Regarding the subscription revenue, it's doable, but you kind of have to start with it, not pivot to it mid-game, because that way your whole company and infrastructure is built with what the subscription model can bring you. I think many of the tech companies are just too big for the product that they manage. >We have 20 years of evidence on what tech businesses can be built on the Internet that make money. It’s narrow and mostly can’t solve the problems that remain. People will also want to invest their money into what they think/believe will be the future. My guess is that internet/IT is complex enough that most people don't understand it and see it as “magic” and because it's “magic” who knows what's possible, might as well pour in millions. But as you've said, the reality always catches up to the truth.
bane 3y ago
Bootstrapping also offers a better route towards pivoting into a lifestyle business if the market growth VCs need just isn't there.

skybrian 3y ago

The founders themselves could also lose interest over the years if the website isn't as popular as they hoped, and it's still a slog.

aleph_minus_one 3y ago
> The founders themselves could also lose interest over the years if the website isn't as popular as they hoped, and it's still a slog. Rather: the founders are lying and deceiving if they talk about their great vision and its importance for mankind, if in reality they are just looking for popularity, and are eschewing the slog.
- skybrian 3y ago
  That's one scenario. There are others.

dopeboy 3y ago

> We’re at the end of a grand experiment of “you can take VC money and deliver a tech with new values, one that people want.” This is an extreme position. More likely, we are seeing repricing occur. There are still worthy, venture backable ideas. Probably less of them than in the past.

MichaelZuo 3y ago

“you can take VC money and deliver a tech with new values, one that people want.” Well you can... just that there's no guarantee that the 'people who want' will also want to pay enough, on average, for it to be sustainable.

Aeolun 3y ago

> X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not. Twitter could. MuskX can not.

FormerBandmate 3y ago
Twitter Blue was a total flop before Musk. I'd bet Twitter's subscription revenue has grown astronomically (although not nearly enough to make up for $1.3 billion in stupid debt payments and a $3 billion shortfall in advertising revenue)
- dghlsakjg 3y ago
  Twitter blue was launched less than six months before Elon started his takeover bid. It’s hard to call a six month old niche product a flop. I’d bet that subscription revenue has grown astronomically because the business strategy pre Musk was advertising based instead of subscription based. He destroyed the advertising business, and is trying to make subscriptions work.

FormerBandmate 3y ago

YouTube and Hulu did it very successfully. Twitter has just done it in a really stupid way, because their management values politics over the actual business of running a social media platform (moreso now than before, but still very much before)

deleted 3y ago
[deleted]
DeathArrow 3y ago
X switches to subscription exactly because politics forces them to, by trying to scare and shame advertisers. Once subscription revenue is enough, scare and shame won't work and politics won't have anything to do with the future of the business.
- moomin 3y ago
  I’m not sure you understand what advertising cares about. They care about reach and brand value, both of which have dropped for Twitter. “Politics” is a component of brand value, but it’s got nothing to do with reach, which is falling through the floor. But equally “politics” doesn’t explain the drip in brand value, either. The FIFA World Cup has _dreadful_ politics, advertisers don’t care because it’s still a great brand with a huge reach. Musk is rich and connected enough to be able to ignore commercial reality for a basically unlimited amount of time, but I seem to recall you were arguing elsewhere on this thread that company owners should only care about the money a company makes.
  - DeathArrow 3y ago
    > “Politics” is a component of brand value, but it’s got nothing to do with reach, which is falling through the floor. I think reach was falling because of political pressure. > I seem to recall you were arguing elsewhere on this thread that company owners should only care about the money a company makes. I was arguing that the goal of a company is to generate profit. That should be the goal. If business owners do that or don't, it's up to them. And I am not arguing that Musk does a good thing if he doesn't have the profit as the objective.

bko 3y ago

Why can't you take VC money and run the business the way you want? They can't force you to do anything. Sure they can pressure you, but if you have ownership and they have a minority stake, you can do what you want. Ello could have stopped at any time. Why did they raise 5 million only 6 months after their first round and another 5 million 6 months after that? What were they spending their money on? I don't see how this would have worked if they hadn't taken money > X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not. I don't know. X showed that you can fire ~80% of your employees and the product could still exist. Not only exist but push product at a faster pace. In the last year you got editable comments, subscriptions, revenue sharing, blue checkmark for sale, alternative check marks for govts and org, culling of old accounts, API restrictions, forcing people to put parody identify themselves, longer videos, just to name a few off the top of my head. I noticed more large changes in the last year than the last 5. You don't need a lot of people to run a SaaS company and you can cut a lot of bullshit. And all tech companies are coming around to that conclusion. Maybe if Ello had raised only a few million and kept around a dozen employees or so, it could have succeeded.

bruce511 3y ago
>> Why can't you take VC money and run the business the way you want? Because taking VC money let's you defer the revenue question. And by deferring it, you then have to bait-and-switch the users. Let me be clear. It's OK to get startup money. Businesses need capital to get going. But revenue should be the original business plan. In other words, who is paying for this site, and how? Ello ruled out advertising and data sale - that's fine, but that leaves subscriptions, donations, premium features, whatever. For a "regular" business, each wants to become sustainable, its important to become profitable ASAP. The team is focused on revenue, keeping costs down and so on. Once it can pay expenses and salaries it can run forever. The obvious revenue here is subscriptions. Income rises with expenses. But of course if you charge you'll grow slowly. So you start free, which means customers will rebel later. (Anyone see parallels to Open Source companies here?) VC money allows you to kick this can down the road. Small angel investment? Sure, no problem. You still have majority control. But if you are using that money to pay salaries, then it'll quickly run out. If you don't have enough revenue, you could just close up, but you dont, you go get a series A. Then B. Then C and so on. The implication is you are selling equity. One day that investor equity exceeds 25%. A round or two later it's over 50%. You've lost control. (And I'm assuming all the founders are in agreement all the time - in reality one wants to cash out, and joins the investors camp well before the 50% is reached.) So, you can grow slowly, and sustainably. Or you can take money, grow fast, and "hope". But make no mistake, when you sell -equity- you are selling control. You are selling your right to dictate "principles". That is -what- you are selling-. Since you are selling to people who are in it for the financial return, the end result is like night following day; inescapable. If you want to build a business on principles, not profit, you HAVE to answer the revenue question first.

throwaway167 3y ago

Few web businesses have a truly huge minimum efficient scale. For those that do, it's huge. For those that don't, it's quite small. And for the small ones, Wordpress or similar powers their laundromat. A good small business. As you say, one that takes effort to run. Stripes the banks POS, perhaps someone has some mid scale in Tide sales in the middleware SaaS, there can be a franchise that doesn't fully adapt to how many socks Vs fur local customers have. But think laundromat. Local restaurant. Which are fine businesses.

DeathArrow 3y ago

>The secret is out now that, mostly, founders make the same amount of money in the same amount of time whether they go the VC or bootstrapped route (when it’s a winning business). I pretty much doubt it is the same amount of time. And I doubt the same percent of businesses survive nevermind win.

DeathArrow 3y ago

>But if you are a founder that cares about anything - anything - the route that gets you there is founder control, patience, and a customer base that pays. Most successful founders, from Edison to Gates and Bezos went in the business to make money, not to change the world. Changing the world for better or for worse is mostly a side effect. The goal of a business is profit, not ideology.

moomin 3y ago
You’re all over this thread but I think you need to read it a bit more carefully. There’s no reference to any belief system in the post you’re replying to, there’s an assertion about expected profit and control. You can disagree with that assertion, and indeed have on another thread, but within the context of the assertion the poster is correct. I think you’re wrong to even think this is about “ideology”, which is presumably a set of beliefs you are against. It applies as much to _variance_, which 100% is something a founder should care about.
- DeathArrow 3y ago
  The post I replied to, was talking about founders that care about anything. As opposed to founders that do not care and are in it just for the money. That's how I read it and you have the right to disagree. That's why we are on a discussion forum. To share ideas and speak our minds freely, regardless if we agree or not. I hope you have fun tracking and counting my posts and it represents a good spending of your time.
  - nrb 3y ago
    I read it as: this advice applies universally, as in any space you are passionate about.
danjac 3y ago
How much profit does Amazon make these days again?
- 3y ago

eterevsky 3y ago

I think Substack is a pretty clear example of subscription model working well. There's also Patreon that is doing very well. I wouldn't discount YouTube Premium and Twitter subscriptions. They don't cover the majority of users, but are a viable option if you (like me) can't tolerate ads.

helsinkiandrew 3y ago
They're both companies that help others monetize their content, Substack is still quite small and Patreon has stumbled a bit recently trying to justify it size and value: https://finance.yahoo.com/news/patreons-valuation-dropped-70-last-140136284.html https://finance.yahoo.com/news/patreons-valuation-dropped-70...
nonameiguess 3y ago
Substack and Patreon both largely work because the top producers there got popular somewhere else first and then brought a large audience with them. It's not clear if a creator economy consisting entirely or primarily of platforms like this would be possible. Hell, at least at first, Ello even tried this same technique. It was meant to be an online gathering place for pre-existing communities of artists who already knew each other from elsewhere. Even Facebook did this at first, too, automatically placing people into networks for their universities, assuming they would already know many of the other users from class. Ello required personal invitations whereas Facebook required a .edu e-mail address to register. The fundamental problem here is all the value is in the network itself, not the platform. The fact that the network is largely on Facebook is as much a matter of chance and historical inertia as it is anything Facebook did well as a company or a technology. Likewise, I don't know that Substack did anything particularly repeatable to snag people like Andrew Sullivan and Glenn Greenwald right as traditional publishers tanked. They just happened to be in the right place at the right time. It's not like there is no precedent. Film studios and record companies have more or less always operated this way. All of the value of their products is created by the artists, not by the company. The only way for them to moat any of it is signing artists to exclusive contracts before they get big enough to have real negotiating power. But web platforms don't want to think of themselves as another MGM studios. They want to be 1950s Ford but with near-zero marginal cost of goods sold.

LoveMortuus 3y ago

Regarding the subscription revenue, it's doable, but you kind of have to start with it, not pivot to it mid-game, because that way your whole company and infrastructure is built with what the subscription model can bring you. I think many of the tech companies are just too big for the product that they manage. >We have 20 years of evidence on what tech businesses can be built on the Internet that make money. It’s narrow and mostly can’t solve the problems that remain. People will also want to invest their money into what they think/believe will be the future. My guess is that internet/IT is complex enough that most people don't understand it and see it as “magic” and because it's “magic” who knows what's possible, might as well pour in millions. But as you've said, the reality always catches up to the truth.

bane 3y ago

Bootstrapping also offers a better route towards pivoting into a lifestyle business if the market growth VCs need just isn't there.