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The Profitable Startup

153 点作者 tommoor3 个月前

16 条评论

enra3 个月前
Karri from Linear here.<p>I wrote this to challenge the common dichotomy that startups are either VC-backed money-burning machines or anti-VC&#x2F;profitably bootstrapped. It doesn’t have to be that binary. There’s a spectrum, a middle ground. You can retain control by being profitable while still using funding as leverage or as a safety net if things don’t go as planned.<p>One of the paradoxes of fundraising is that it’s easiest when you don’t need the money—and almost impossible when you do. By keeping the company mostly profitable, you never have to need it, giving you full control over timing and the ability to choose the right deal. But having that funding can enable you some more leverage or add more risk business you could afford while being bootstrapped. In our case we raised the funding for the conservative case, but the reality turned much better than expected.<p>Another misconception is that sustainable growth comes from spending or hiring. In reality, many great products take off first and because they take off, any amount of hiring becomes justified. Some of these companies are even profitable before they go on a hiring spree. The problem is that the typical approach isn’t nuanced or intentional enough. You might decide to hire 100 engineers before knowing how the next 10 engineers impact your trajectory. If you cut the hiring plan in half—or even to a quarter—it might not affect growth at all. But there’s often an assumption that growing the team is also good, and maybe it comes from a time in the 90s or something when you had hire people to man the phones to take orders.<p>What I believe is that startup’s growth is primarily driven by product superiority and market fit, not just by headcount or marketing spend. Those things can amplify success, and in some cases, they can even mask a bad market fit through sheer force of sales and marketing.<p>A less cynical take on VCs is that they’re not necessarily pushing companies to burn cash they just want founders to double down when they see a company working. But whether you can truly scale depends on your market dynamics. Sometimes, you need time to learn or to land the right deals in a segment before pouring money into growth.<p>The problem is that the current thinking is often too simplistic. Since you&#x27;re startup and have cash, the spending more is always the right move. Going all the way 100 when you could dial it down to 50 or 30 and regain control and de-risk the changes of complete flare out.
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tiffanyh3 个月前
While I love companies that become profitable early and grow at a rate that allows them to continue being profitable ... it becomes an issue with investors.<p>Linear has raised over $50M+ (at $400MM valuation)<p>You just can&#x27;t grow fast enough while being profitable - to grow into &amp; surpass that kind of valuation ... in a timeframe ok that&#x27;s for your investors.<p><a href="https:&#x2F;&#x2F;tracxn.com&#x2F;d&#x2F;companies&#x2F;linear&#x2F;__xC97n-jdX7VZjDBpNyRfVH-H_Elzu354nD5Yz5FaUVI&#x2F;funding-and-investors" rel="nofollow">https:&#x2F;&#x2F;tracxn.com&#x2F;d&#x2F;companies&#x2F;linear&#x2F;__xC97n-jdX7VZjDBpNyRf...</a>
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vasco3 个月前
My usual take on this is that if you do a great job, you&#x27;ll grow at the speed your market is growing, ride the wave so to speak. The price of admission is doing a great job though, the rest of the comment doesn&#x27;t apply blindly.<p>If your market is having a hockey stick growth because it&#x27;s new or in vogue, even underperforming teams will outgrow the best team in the world stuck in a linear growth market.<p>So I chuckle a bit when founders try to convince you that they are the reason for the hockey stick, or that they are the reason for the linear growth. You&#x27;re riding the wave more than anything. The main difference then being if you end up being the one chosen by Softbank to aggregate the market or if you&#x27;ll be one of the ones that are bought out by them.
api3 个月前
The reason for prioritizing growth above all else, historically, is network effects. If you try to grow more slowly someone buying growth by foregoing profitability will zoom past you and capture the network, and once the network is captured it&#x27;s incredibly difficult to disrupt.<p>A good recent lesson in the awesome power of network effects is X. A huge number of users on that platform hate the direction Elon -- and it -- have taken, but they still use it. Major brands still use it. Governments targeted by people Elon is amplifying use it. Journalists who hate it use it. Why? People use it because people use it, and it&#x27;s hard to get everyone to migrate at once.<p>Network effects are a force of nature. They are the strongest possible lock-in.
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foliovision3 个月前
Good article but it doesn&#x27;t fit in with American thinking. In search of a unicorn. The only very visible company in the United States I can remember following the profitability and measured growth path was 37signals. Even they have occasionally wandered way off course, with multiple products, and neglecting the main product (long discussion). I agree with you. This philosophy of profitable growth makes me interested in Linear as a potential customer. There&#x27;s less risk of you closing your doors or just selling your smaller users out.
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codingwagie3 个月前
Alot of startups arent profitable because they are ran by people that have prestigious pedigrees, but dont know what theyre doing&#x2F;have no experience. So they blow all kinds of money on bad ideas&#x2F;poor execution, but are still able to raise more funding.<p>Eventually for some of these companies something clicks, and they do get to something of a valuable company.<p>This is what ZIRP was.<p>Alot of people dont know that investors are okay with this, they have 20 Million to push into a company, and figure that something might pop out.
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mtrovo3 个月前
I think the author is correct that more startups can be profitable earlier than they think. It comes down to making conscious decisions about hiring and focusing on customer value, it&#x27;s that simple. The reason why that&#x27;s not the case often comes from how blitzscaling and ZIRP became the norm for a few years, and how VC, especially post seed stage, started to resemble a Ponzi scheme, with investors trying to put lipstick on a pig and pass the bag down the road.
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pclowes3 个月前
I forget exactly who said it but somebody said something along the lines of “venture capital is rocket fuel, unless you have a rocket it will only blow up your engine. Have a Bugatti Veyron? It will blow up your engine.”<p>This is also something DHH has been saying for years. However, I think it is more true now than ever. With how easy it is to start and scale a software company I really struggle to understand the justification for venture funding at the earliest stage, unless you want to larp as a founder, have low conviction, or just want “the experience”.
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8n4vidtmkvmk3 个月前
We&#x27;re technically profitable and pretty much always have been, since our first paid sub. I still don&#x27;t know how to scale from 0 to 1 employee though. I tried hiring a couple times but... It&#x27;s really hard to justify paying someone $$$ to do a terrible job, having to train them instead of just delivering actual value myself, and then just praying to God they deliver non-negative value after a few months?? How do I do this? I should target them generating 500k revenue? That&#x27;s more than our total revenue.
unreal373 个月前
If all you&#x27;re doing is building a project management app, yeah it&#x27;s easy to be profitable.<p>The trick is when you&#x27;re trying to take risks and innovate. It took Amazon a long time to be profitable. It took Uber a long time to be profitable. It took Facebook a long time to be profitable.<p>When it&#x27;s a land grab - when you&#x27;re racing against other companies in a new market like AI - you need to burn money fast to run fast. Can&#x27;t take a year in private beta.
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tommoor3 个月前
All the folks in replies saying this is &quot;bad for investors&quot;, lets check back in 5 years and see how they did :)
napworth3 个月前
Question. If revenue is benchmarked at $500k - $1mil per employee, how much salary is each employee expected to receive?
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rexreed3 个月前
Profitable startup works for founders, but it doesn&#x27;t work for the venture capital industry.<p>But it&#x27;s hard to be a profitable, bootstrapped startup when rocket fueled &#x2F; venture-backed startups are too busy growth hacking and venture-funded blitzscaling to capture customers at low cost to the customer, only later to screw the customer when it comes time to either flip the company to a buyer in order to return those VC dollars, or to turn the screws on the customers and enshittify the product when blitzscaling is no longer feasible.<p>Personally, I prefer a bootstrapped, profitable startup in markets where blitzscaling venture-backed rockets aren&#x27;t raiding the customers.
ricokatayama3 个月前
A great piece of advice from Linear. Even in this flourishing AI landscape, every startup should avoid being overly speculative about resource mgmt. Linear raised from YC and Sequoia though. I&#x27;d love to learn more about how they balanced their burn rate
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esafak3 个月前
Profitability is good for product quality, if you can stay afloat, but it is a choice; venture capital lets you trade profitability for growth. And once you are big, you are able to cater to enterprises with deeper pockets to pay down your debt.
rizs123 个月前
I&#x27;ve heard it said that for investors, finding the companies that need money is easy. But the real gold is in finding the companies that don&#x27;t