4 thoughts on “In world of startups, revenue kills”

  1. It could also be the rate of the free cash flows. For instance, a company like Square may be making revenues, but also losing money on processing fees, but the processing volume may be so high and growing in a certain direction that investors can model out scenarios by which, at a certain point in the future, the free cash flows result in not only profit, but high-growth profit. I’m guessing you’re alluding to Pinterest and SnapChat. With Pinterest, which is already the #13 ranked site in the U.S. (Alexa) and rising, there is already strong evidence that Pinterest is leading to e-commerce transactions. The traffic is so high that having revenues doesn’t even matter – the chance that they won’t make this turn is now lower than if they will come through. With SnapChat, which doesn’t cost much to run, there’s as many pictures shared on there in a day as there is on Facebook’s entire network (~350M/day), and there are ways to capture all sorts of metrics from mobile interactions that aren’t possible on the web or in Facebook’s framework. The brand is also valuable. So while SnapChat “could’ have been monetizing, it’s secondary to making sure the growth maintains and then locks-in. After then, the valuation talk is moot.

    1. Is the theory with Pinterest/Snapchat that if you have Facebook/Twitter type growth (or even beyond), it is clear based on FB/Twitter’s history that you can overlap an advertising model on top of that user base that will at least support a 3.5 billion valuation and potentially much beyond?

Comments are closed.