3 ms·

"The company is the product." -> When I'm feeling more optimistic I see this is how VC sees their portfolio and how you sell it to them, but not what the compan

by klik99 1y ago

"The company is the product." -> When I'm feeling more optimistic I see this is how VC sees their portfolio and how you sell it to them, but not what the company is in reality. Like playwrights who write under authoritarian regimes selling it to the censor as promoting the regime while it actually satirizes and undermines them. But even if it's possible to walk that line, the data just doesn't back it up as common. Side note, on "exit plan" - the most ridiculous thing about raising money is you need an exit strategy but you cannot explicitly say you have an exit strategy, you have to imply it while the whole time pretending it's not a focus for you. It's a very weird dynamic.

bruce511 1y ago
It helps to formally understand who is who. Every company has staff, customers, suppliers and product. If you go the VC route then the VC is the customer. Since any good business is focused on customer satisfaction, a VC funded business is focused on VC satisfaction. VCs want an exit. Which necessarily means switching funding model. The only switch that has worked so far is advertising. Advertising requires attention. Of course a business can succeed with say SaaS subscriptions instead of advertising. This works well for B2B, but less so for B2C. Amazon is the poster child for B2C success, but makes most of its money from AWS (which is B2B). The pattern is now well understood, and well demonstrated. If your business is B2C then figure out the funding model. If you can't do that, if you can't do it without VC money, then your path is predestined.
- iamacyborg 1y ago
  > Amazon is the poster child for B2C success, but makes most of its money from AWS (which is B2B). Amazon still makes the most revenue from ecom.
  - bobnamob 1y ago
    But most of its profit from AWS
  - spwa4 1y ago
    That's what you get when an expert financial trader makes a company. He wanted billions from the start ... so how to do it? There's only one way, really: a pyramid scheme. But an atypical one: get lots of sales, lots of revenue and change any profit into capital. This is quite a common plan in Western Europe, and that's why it doesn't work there. Why would you do that? Well companies are taxed on profit. And the money you pay to investors ... is also paid out of the profit. No profit -> all the money stays in the company, under the control of management, ready to be deployed on yachts and castles for the CEO. Governments get nothing. Investors get nothing. Jeff Bezos (and very early investors) get everything. If they get desperate there is a buyback (no doubt matched by a greater stock package for the top of the company). This is a pyramid scheme because the whole company only works because it only makes extremely minimal profit. If it starts demanding profit it will be eaten alive by competition in no time at all. Money has to be invested in, flows to the top, and is taken out at the top. No doubt Bezos was utterly baffled by the success of it and therefore isn't yet out, but ...
    - kmeisthax 1y ago
      > If it starts demanding profit it will be eaten alive by competition in no time at all. At least until it becomes too big to fail and can build anticompetitive "moats" around itself to increase the amount of profit it can take. For example, in the case of Amazon, they aren't just a retailer, they're a logistics and shipping company, too. And all of those are separate, itemized services that suppliers pay for, which increases revenue in a very opaque and difficult to understand way. On the customer's end that means higher prices and worse selection. Any competitor to Amazon doesn't just have to get the same products for cheaper, they also have to build their own shipping company that can get products to people with <48hr turnaround. This provides a lot of room for Amazon to take a cut. That being said, when you start building a giant business empire the direct profits matter less than the amount of control over the economy you get. In other words, you have the power to tax and subsidy, just like a government does. Amazon maintained minimal profit by deliberately subsidizing new business ventures until they could get big enough to become extractive on their own. At no point does the business flip a switch and go from "deliberately burning money to avoid carrying a profit" to "extracting so much profit they get eaten by nimbler competition". They instead are always burning money, and always extracting, moving money to where they see fit.

by klik99 1y ago

bruce511 1y ago

It helps to formally understand who is who. Every company has staff, customers, suppliers and product. If you go the VC route then the VC is the customer. Since any good business is focused on customer satisfaction, a VC funded business is focused on VC satisfaction. VCs want an exit. Which necessarily means switching funding model. The only switch that has worked so far is advertising. Advertising requires attention. Of course a business can succeed with say SaaS subscriptions instead of advertising. This works well for B2B, but less so for B2C. Amazon is the poster child for B2C success, but makes most of its money from AWS (which is B2B). The pattern is now well understood, and well demonstrated. If your business is B2C then figure out the funding model. If you can't do that, if you can't do it without VC money, then your path is predestined.

iamacyborg 1y ago
> Amazon is the poster child for B2C success, but makes most of its money from AWS (which is B2B). Amazon still makes the most revenue from ecom.
- bobnamob 1y ago
  But most of its profit from AWS
- spwa4 1y ago
  That's what you get when an expert financial trader makes a company. He wanted billions from the start ... so how to do it? There's only one way, really: a pyramid scheme. But an atypical one: get lots of sales, lots of revenue and change any profit into capital. This is quite a common plan in Western Europe, and that's why it doesn't work there. Why would you do that? Well companies are taxed on profit. And the money you pay to investors ... is also paid out of the profit. No profit -> all the money stays in the company, under the control of management, ready to be deployed on yachts and castles for the CEO. Governments get nothing. Investors get nothing. Jeff Bezos (and very early investors) get everything. If they get desperate there is a buyback (no doubt matched by a greater stock package for the top of the company). This is a pyramid scheme because the whole company only works because it only makes extremely minimal profit. If it starts demanding profit it will be eaten alive by competition in no time at all. Money has to be invested in, flows to the top, and is taken out at the top. No doubt Bezos was utterly baffled by the success of it and therefore isn't yet out, but ...
  - kmeisthax 1y ago
    > If it starts demanding profit it will be eaten alive by competition in no time at all. At least until it becomes too big to fail and can build anticompetitive "moats" around itself to increase the amount of profit it can take. For example, in the case of Amazon, they aren't just a retailer, they're a logistics and shipping company, too. And all of those are separate, itemized services that suppliers pay for, which increases revenue in a very opaque and difficult to understand way. On the customer's end that means higher prices and worse selection. Any competitor to Amazon doesn't just have to get the same products for cheaper, they also have to build their own shipping company that can get products to people with <48hr turnaround. This provides a lot of room for Amazon to take a cut. That being said, when you start building a giant business empire the direct profits matter less than the amount of control over the economy you get. In other words, you have the power to tax and subsidy, just like a government does. Amazon maintained minimal profit by deliberately subsidizing new business ventures until they could get big enough to become extractive on their own. At no point does the business flip a switch and go from "deliberately burning money to avoid carrying a profit" to "extracting so much profit they get eaten by nimbler competition". They instead are always burning money, and always extracting, moving money to where they see fit.