Should startups focus on profitability or not? [2011]

http://www.bothsidesofthetable.com/2011/12/27/should-startups-focus-on-profitability-or-not/

by robot • 12 years ago

2 1 12 years ago

mindcrime• 12 years ago

This is a perfect example of how the interests of VCs and the interests of entrepreneurs can be (and often are) misaligned.

Because of the circles I run in I tend to meet many people who eventually do want to build large companies and therefore do want to eventually raise VC and “go big.” But they want to do it with leverage.

This ignores the scenario of "We plan to 'go big' and build an immensely scalable company, but we aren't worried about doing it super fast". And that, of course, is because that scenario doesn't work for VCs, where their funds are almost always time-boxed.

As an aside, I understand that this is one reason that it's a good idea to raise from brand new funds when possible - they have the maximum portion of their lifespan still in front of them, so you get less "time pressure" from the VCs. If you raise in year 7 of a 10 year fund, you'll be under a tremendous amount of pressure to have an exit in 3 years.

Should startups focus on profitability or not? [2011]

Related Stories