4 ms·

"Pinterest, an online scrapbooking and social networking site with no revenue, became worth $1.5 billion in less than three years." Does 'no revenue' qualify a

by w3pm 14y ago

"Pinterest, an online scrapbooking and social networking site with no revenue, became worth $1.5 billion in less than three years." Does 'no revenue' qualify as a business model?

lutusp 14y ago
> Does 'no revenue' qualify as a business model? Only if "no revenue" actually means "no profits". There are perfectly sane business plans that grow the company and pay all the salaries, but don't turn a profit. It can't go on forever, but it's not a disaster either. I suspect the OP didn't actually mean "no revenue".
- hayksaakian 14y ago
  Are you implying that no revenue is a valid business model?
  - lutusp 14y ago
    > Are you implying that no revenue is a valid business model? Did you read my post? I said the opposite.
- throwaway3422 14y ago
  >Only if "no revenue" actually means "no profits". Okay, the definition of "no revenue" means not one cent coming into the company. The only way to make a profit without a single cent entering the company is to commit accounting fraud.
- mseebach 14y ago
  The only way equity can have a positive value is if it generates ROI. No-profit-but-pays-the-salaries is a lifestyle business, which is great and all, but the equity is worthless. Pinterest's business model, of course, it getting bought by Facebook, and that is indeed a little bubbly. Basically, if Facebook slows down, then the entire cottage industry of fancy social media startups hoping to get bought will collapse.
  - lutusp 14y ago
    > The only way equity can have a positive value is if it generates ROI. Yes, but If the company's value increases, that increases the value of shares, even in the absence of profits. This is one reason a no-profit business can attract loyal investors -- that and the promise of future profits, of course. > No-profit-but-pays-the-salaries is a lifestyle business, which is great and all, but the equity is worthless. Not so. A company's equity represents the company's value, not its present profitability (although some equity investors require profits, other are satisfied to see growth). One can grow a business by running at an apparent 0% profit in a way that causes the business size and customer base to grow over time. The argument can be made that business expansions can only result from profits, but this can be structured as essential equipment replacements, personnel increases and so forth, in a way that profits remain at zero.
    - mseebach 14y ago
      Yes, of course. I read the GP as meaning never turn a profit beyond salaries, but on a second reading, that's probably not the intended meaning.

by w3pm 14y ago

"Pinterest, an online scrapbooking and social networking site with no revenue, became worth $1.5 billion in less than three years." Does 'no revenue' qualify as a business model?

lutusp 14y ago

> Does 'no revenue' qualify as a business model? Only if "no revenue" actually means "no profits". There are perfectly sane business plans that grow the company and pay all the salaries, but don't turn a profit. It can't go on forever, but it's not a disaster either. I suspect the OP didn't actually mean "no revenue".

hayksaakian 14y ago
Are you implying that no revenue is a valid business model?
- lutusp 14y ago
  > Are you implying that no revenue is a valid business model? Did you read my post? I said the opposite.
throwaway3422 14y ago
>Only if "no revenue" actually means "no profits". Okay, the definition of "no revenue" means not one cent coming into the company. The only way to make a profit without a single cent entering the company is to commit accounting fraud.
mseebach 14y ago
The only way equity can have a positive value is if it generates ROI. No-profit-but-pays-the-salaries is a lifestyle business, which is great and all, but the equity is worthless. Pinterest's business model, of course, it getting bought by Facebook, and that is indeed a little bubbly. Basically, if Facebook slows down, then the entire cottage industry of fancy social media startups hoping to get bought will collapse.
- lutusp 14y ago
  > The only way equity can have a positive value is if it generates ROI. Yes, but If the company's value increases, that increases the value of shares, even in the absence of profits. This is one reason a no-profit business can attract loyal investors -- that and the promise of future profits, of course. > No-profit-but-pays-the-salaries is a lifestyle business, which is great and all, but the equity is worthless. Not so. A company's equity represents the company's value, not its present profitability (although some equity investors require profits, other are satisfied to see growth). One can grow a business by running at an apparent 0% profit in a way that causes the business size and customer base to grow over time. The argument can be made that business expansions can only result from profits, but this can be structured as essential equipment replacements, personnel increases and so forth, in a way that profits remain at zero.
  - mseebach 14y ago
    Yes, of course. I read the GP as meaning never turn a profit beyond salaries, but on a second reading, that's probably not the intended meaning.