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This is the stupidest drivel I have ever read. If you brought this up outside of the inane SV bubble, you would be laughed out of the room. They even state "fo

by zmanji 14y ago

This is the stupidest drivel I have ever read. If you brought this up outside of the inane SV bubble, you would be laughed out of the room. They even state "for many apps, like Instagram [...]" as a good example when revenue is not needed. I'm flabbergasted.

timrosenblatt 14y ago
If Instagram had been charging for their app, it would have been very hard for them to get to the scale where they would be acquired by Facebook, especially for anything near the $1b. I'd say everyone who had a piece in that deal is flabbergasted too, but for different reasons. Is this a strategy people should always aim for? No. But there are legitimate reasons why revenue should not be the top priority, and this post does a good job at narrowing it down.
- zmanji 14y ago
  [...] it would have been very hard for them to get to the scale [...] Without revenue you can say it would have been very hard for them to, you know, exist as a company for some period of time.
  - timrosenblatt 14y ago
    You can say that, yes. But as a company with almost $8m in funding (prior to the $50m/acquisition thing; http://www.crunchbase.com/company/instagram http://www.crunchbase.com/company/instagram) and low costs, they can defer revenue for a while.
    - ktizo 14y ago
      So if you can blag 8 million without any promise of revenue, then don't bother with revenue. Sounds fine, but I assume that this doesn't apply to bootstrapped companies in areas without large quantities of gambling billionaires.
      - evanhamilton 14y ago
        Sure...I think that's a big part of Rich's point. If you're bootstrapping or building a lifestyle business, this isn't the way you want to go. Neither is right or wrong (though some specific instances certainly seem a bit gross). (And regardless, eventually you will need to make money)
        ktizo 14y ago
        I remember this the first time round. If you manage to be sneaky with an exit strategy, you never need to make money as you bail with a ton of cash before that becomes neccessary. And when things like Instagram come around, the amount of people making businesses purely with the motive of sneaky exit strategies starts to completely overshadow the amount of businesses created that are genuinely valuable. Then things can get very messy.
        drusenko 14y ago
        None of these companies are "trying to be sneaky with an exit strategy". They are trying to grow very large, independent businesses. If you build to flip, you are most likely going to fail -- it's just not a winning strategy. But putting off revenue != built to flip. Having a ton of usage and figuring out how to make money is easy. Getting a ton of usage is hard. They are focusing on the hard problem first, and the easier problem second.
        zmanji 14y ago
        Are you honestly saying that Instagram's team was "trying to grow a very large, independent businesses"?
        ktizo 14y ago
        None of them? That sounds more like faith based economics than anything else, of couse some of them must be doing this. And offering a service for free at point of use can often be much easier than turning it into revenue later, especially if you have millions in the bank from investment already. There are plenty of stale corporate corpses littering that particular road, but with founders that did quite nicely out of it.
    - timrosenblatt 14y ago
      @ktizo absolutely correct. He hints at that in the post, but that's another one of the criteria for when this strategy isn't appropriate. It's rare to have a strategy that is universal. Even "staying in business" is not always a correct strategy, and if you want to be successful as a business person, it's useful to know all of the tools in your arsenal. Same thing as being a programmer. MySQL isn't the correct DB for everyone, so it helps to know when it's appropriate and when it's not.
drusenko 14y ago
Here's another way to put it: Your hardest problem is to build something that a lot of people want. It's really hard to do that. It's worth focusing all of your efforts on that than trying to be profitable on day 1. It is very unlikely that you will be extremely popular and not find a way to make money. It is very likely that you can figure out a way to make money but not be very popular. Making money is, relatively speaking, easy. Focus on the hardest problems you have first, not the easiest ones.

by zmanji 14y ago

timrosenblatt 14y ago

If Instagram had been charging for their app, it would have been very hard for them to get to the scale where they would be acquired by Facebook, especially for anything near the $1b. I'd say everyone who had a piece in that deal is flabbergasted too, but for different reasons. Is this a strategy people should always aim for? No. But there are legitimate reasons why revenue should not be the top priority, and this post does a good job at narrowing it down.

zmanji 14y ago
[...] it would have been very hard for them to get to the scale [...] Without revenue you can say it would have been very hard for them to, you know, exist as a company for some period of time.
- timrosenblatt 14y ago
  You can say that, yes. But as a company with almost $8m in funding (prior to the $50m/acquisition thing; http://www.crunchbase.com/company/instagram http://www.crunchbase.com/company/instagram) and low costs, they can defer revenue for a while.
  - ktizo 14y ago
    So if you can blag 8 million without any promise of revenue, then don't bother with revenue. Sounds fine, but I assume that this doesn't apply to bootstrapped companies in areas without large quantities of gambling billionaires.
    - evanhamilton 14y ago
      Sure...I think that's a big part of Rich's point. If you're bootstrapping or building a lifestyle business, this isn't the way you want to go. Neither is right or wrong (though some specific instances certainly seem a bit gross). (And regardless, eventually you will need to make money)
      - ktizo 14y ago
        I remember this the first time round. If you manage to be sneaky with an exit strategy, you never need to make money as you bail with a ton of cash before that becomes neccessary. And when things like Instagram come around, the amount of people making businesses purely with the motive of sneaky exit strategies starts to completely overshadow the amount of businesses created that are genuinely valuable. Then things can get very messy.
        drusenko 14y ago
        None of these companies are "trying to be sneaky with an exit strategy". They are trying to grow very large, independent businesses. If you build to flip, you are most likely going to fail -- it's just not a winning strategy. But putting off revenue != built to flip. Having a ton of usage and figuring out how to make money is easy. Getting a ton of usage is hard. They are focusing on the hard problem first, and the easier problem second.
        zmanji 14y ago
        Are you honestly saying that Instagram's team was "trying to grow a very large, independent businesses"?
        ktizo 14y ago
        None of them? That sounds more like faith based economics than anything else, of couse some of them must be doing this. And offering a service for free at point of use can often be much easier than turning it into revenue later, especially if you have millions in the bank from investment already. There are plenty of stale corporate corpses littering that particular road, but with founders that did quite nicely out of it.
  - timrosenblatt 14y ago
    @ktizo absolutely correct. He hints at that in the post, but that's another one of the criteria for when this strategy isn't appropriate. It's rare to have a strategy that is universal. Even "staying in business" is not always a correct strategy, and if you want to be successful as a business person, it's useful to know all of the tools in your arsenal. Same thing as being a programmer. MySQL isn't the correct DB for everyone, so it helps to know when it's appropriate and when it's not.

drusenko 14y ago

Here's another way to put it: Your hardest problem is to build something that a lot of people want. It's really hard to do that. It's worth focusing all of your efforts on that than trying to be profitable on day 1. It is very unlikely that you will be extremely popular and not find a way to make money. It is very likely that you can figure out a way to make money but not be very popular. Making money is, relatively speaking, easy. Focus on the hardest problems you have first, not the easiest ones.