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"When what they operate is a website" - you mean like eBay, AirBnB, and others? From their S1: 1. 122 million is cost of revenue, which means their support sta

by adevine 12y ago

"When what they operate is a website" - you mean like eBay, AirBnB, and others? From their S1: 1. 122 million is cost of revenue, which means their support staff cost, server/bandwidth costs, and transaction fees (e.g. credit card fees). 2. 40 million marketing, I'm guessing mostly paid search. 3. 37 million product development. 4. 50 million "general and admistrative" Point being, they could probably easily be profitable if they wanted, but at this stage they are trying to invest for growth. As you point out, though, that growth will be difficult if they have this inherent limit on production capacity.

at-fates-hands 12y ago
>> but at this stage they are trying to invest for growth. I think we know how a lot of startups recently have taken this approach and its failed miserably. Groupon is the first that comes to mind. I'm wondering how many more companies have to fail before they realize growth is good, but doing it at a loss is not the way to sustain your business. I guess everybody thinks they're Amazon?
- untog 12y ago
  More like everyone has investors who demand a large return. That's the problem with taking VC cash - you're at their beck and call. You could build a perfectly good sustainable business, but VCs want hockey stick growth and an IPO.
- wcummings 12y ago
  Groupon invested in growth, but that's not why they failed.
- brainflake 12y ago
  I think you're simplifying it too much. It's easy to come to that conclusion in the current market with so much cash floating around, but if the growth rate is there, then it can make a lot of sense to continue spending for that growth. Brad Feld had an interesting post as kind of a back of the envelope for what your finances should look like (http://feld.com/archives/2015/02/rule-40-healthy-saas-company.html http://feld.com/archives/2015/02/rule-40-healthy-saas-compan...). Of course it's intended for companies 'at scale', or around $1M MRR for a SaaS company. There are plenty of examples of companies that operate like this that you probably wouldn't consider reckless with their spending. HubSpot comes to mind.

by adevine 12y ago

at-fates-hands 12y ago

>> but at this stage they are trying to invest for growth. I think we know how a lot of startups recently have taken this approach and its failed miserably. Groupon is the first that comes to mind. I'm wondering how many more companies have to fail before they realize growth is good, but doing it at a loss is not the way to sustain your business. I guess everybody thinks they're Amazon?

untog 12y ago
More like everyone has investors who demand a large return. That's the problem with taking VC cash - you're at their beck and call. You could build a perfectly good sustainable business, but VCs want hockey stick growth and an IPO.
wcummings 12y ago
Groupon invested in growth, but that's not why they failed.
brainflake 12y ago
I think you're simplifying it too much. It's easy to come to that conclusion in the current market with so much cash floating around, but if the growth rate is there, then it can make a lot of sense to continue spending for that growth. Brad Feld had an interesting post as kind of a back of the envelope for what your finances should look like (http://feld.com/archives/2015/02/rule-40-healthy-saas-company.html http://feld.com/archives/2015/02/rule-40-healthy-saas-compan...). Of course it's intended for companies 'at scale', or around $1M MRR for a SaaS company. There are plenty of examples of companies that operate like this that you probably wouldn't consider reckless with their spending. HubSpot comes to mind.