19th
Can profitability suck?
Startup entrepreneur Ben Horowitz recently wrote a post The Case for the Fat Startup. He summarizes the article with:
As you listen to the virtues of the lean start-up–lightweight sales, light engineering, and so on–keep the following in mind:
- If you are a high-tech start-up, your value is in your intellectual property. Don’t stare at your spreadsheets so long that you get confused about that.
- You cannot save your way to winning the market.
- The best companies can raise money even in this market. If you are one of those, you should consider raising enough to wipe out your competition.
The whole post has some interesting points but one of them I highly disagree with :
“Start-up purgatory occurs when you don’t go bankrupt, but you fail to build the No. 1 product in the space. You have enough money with your conservative burn rate to last for many years. You may even be cash-flow positive. However, you have zero chance of becoming a high-growth company. You have zero chance of being anything but a very small technology business”
If you are able to build a startup to cash-flow positive or you have runway but have been unable to really crack you market you are not stuck, in fact you are in a great position. As a entrepreneur you will look at all of the infrastructure, talents, technologies, etc., that you have in your company and leverage those into a adjacent sector or maybe something entirely new.
Additionally if your startup has taken money from investors then you do not have the right to give up if you do not make it in your first shot at a market. Your duty is to keep trying, iterating and changing things until you are beyond dead (and even then you should probably still try to make it work).
While there are many successful companies that took a ton of money and spent it hard and fast to achieve market dominance, there are just as many stories of great succes of the lean and scrappy start-up that continues to iterate and modify its plans.
