Many startup companies run mostly on VC money instead of actually making enough revenue.
Due to the way investor money works, you can keep your company running on VC money for many years. Making the company profitable in the early stages isn’t entirely necessary as long as the investors get their money back within a reasonable time period.
The idea is, that if you’re able to make your shiny new service very popular, that will be the valuable product you can eventually sell in a merger, IPO or whatever. In some cases like Skype, the intellectual property was also an important part of the deal; not just the userbase. After that, the new owners are free to enshitify the service as much as they like. It’s their problem to make the service actually profitable in the long run while the founders get to drive their Lamorghinis in Dubai.
That’s when the new owners really have to crank up the data leeching and ads, which will kick out a decent percentage of the previous users, but that’s ok as long as enough of them remain.
It’s absolutely sustainable- but once you aren’t satisfied with sustainability and want it to produce an ever growing profit, that’s when things start going sideways and eventually downhill.
I guess the era of getting everything for free wasn’t entirely sustainable after all. Who would have thought.
We never got anything for free. That’s not how capitalism works my dude. We paid, and are still paying, with our data. Only now they want more
Many startup companies run mostly on VC money instead of actually making enough revenue.
Due to the way investor money works, you can keep your company running on VC money for many years. Making the company profitable in the early stages isn’t entirely necessary as long as the investors get their money back within a reasonable time period.
The idea is, that if you’re able to make your shiny new service very popular, that will be the valuable product you can eventually sell in a merger, IPO or whatever. In some cases like Skype, the intellectual property was also an important part of the deal; not just the userbase. After that, the new owners are free to enshitify the service as much as they like. It’s their problem to make the service actually profitable in the long run while the founders get to drive their Lamorghinis in Dubai.
That’s when the new owners really have to crank up the data leeching and ads, which will kick out a decent percentage of the previous users, but that’s ok as long as enough of them remain.
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The downvotes in our comments tell an interesting story. It seems that people don’t want to hear about the strange world of VC money.
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Please tell me how it really is.
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Wasn’t surprised, but I am disappointed.
It’s absolutely sustainable- but once you aren’t satisfied with sustainability and want it to produce an ever growing profit, that’s when things start going sideways and eventually downhill.
Late stage capitalism in action
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We never got anything for FREE.