The raising money fool | Daily #235
There are many lies in tech or at least misconceptions. The biggest misconception is the reason why many startups fail in my opinion. That misconception that you NEED investment or VC money to become ‘profitable’.
There are many tech companies (especially in the US) that have IPO’ed that never made ANY profit. How stupid is that? I understand that the game is played by volumes and the ‘gamble’ that it can turn profitable. For example, if you have billions of users, if you can profit 1 dollar later from that userbase, you immediately profit 1 billion.
That’s a gamble load of investors are willing to take, cause they got fuck you money. They make 10 investments and only 1-2 or of them need to work out to turn a profit.
Or even better. They buy/invest loads of equity early and then flip them later for a higher price. Selling it another fool. Then that fool sells it to another fool for a higher value. (Similar to how crypto and NFTs work nowadays.)
These games are understandable from an investor's perspective. But doesn’t make sense for the entrepreneur in my opinion. Why doesn’t your business already have a profit in the beginning?
Why do you need to raise money if the product can’t even turn a profit yet? They give reasons to like it’s missing feature or needing a bigger audience and blah blah blah all excuses.
The missing features most likely won’t do anything about the core of the product. You need to switch entirely like the Google search engine to Ads.
The audience's argument that it needs to be bigger is even more horrendous, cause what. Do you mean more audience to put more customers’ money in a bottomless pit? Sounds like the U.S. is printing out money, just to ‘buy’ themselves out of an economic crisis.
Is the goal really ‘become too big to fail‘? That sounds like a grifter’s mentality. And I know most entrepreneurs are not like that. They just want to create a product and make the world view their vision. (Every nerd's dream)
But you don’t need to chase this endless quest of unicorns. Be profitable from day one. Don’t rely on investments to save your company. Be sustainable and happy with what you’ve built.