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Growth or profit? A startup’s dilemma.

For a group that prides themselves on being disruptive, startups have become perhaps ironically rutted in this new status quo of a grow at all costs strategy.

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Traditionally, it was simple. A business only achieved critical mass by becoming cash-flow positive. Revenue growth (top line) then had to be converted into profit growth (bottom line), before a business was deemed to be self-sustaining and worthy of public investment.

It’s only been in the last 10 years that social-media companies, such as Facebook and Twitter, have achieved market valuations in billions of dollars, while clearly sacrificing revenue to gain users. The pendulum is swinging back, with investors looking more for the traditional indications of business integrity, stability and growth.

For a group that prides themselves on being disruptive, startups have become perhaps ironically rutted in this new status quo of a grow at all costs strategy.

It’s understandable, when you consider that their investors expect it and competition forces founders to feel they need to set serious growth milestones for every round. Big funds and Wall Street seem to have fed this, and are beneficiaries of it (when it works). Though some observers are undoubtedly still scratching their heads as to how it makes common sense to plough billions into companies that aren’t profitable.

If you're a tech startup looking for alternative financing, register your company on SeedBlink.

By SeedBlink Knowledge

PublishedDecember 07, 2020


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