‘Unlike some of the 3P [third-party] apps, we are not profitable,’ Steve Huffman says in defending the move to charge for high-volume API access.
‘Unlike some of the 3P [third-party] apps, we are not profitable,’ Steve Huffman says in defending the move to charge for high-volume API access.
I feel like this is such a strange stance to take when you’re trying to go public with your company. “We’re not profitable, we’ve never been profitable. Would you like to invest?”
It’s because investors don’t care about profits - they care about the promise of profit growth.
You could make an investment, and normal valuation is like 3-5 years to break even. But if you’re rich already, breaking even does nothing for you - what you care about is what the value of your share of the company is worth in 5-10 years.
They’d rather risk it all and push for 100x ROI - anything from 0-5x is basically the same for them. Only exponential growth will matter for them financially, so at every turn they’ll push for you to take on more debt and reinvest everything in the hopes you become the Google (or get bought by them)