Uber is valued at $72 billion.
LinkedIn sold for $26 billion.
Snapchat went public to the tune of $28 billion.
Slack became a billion dollar company in less than two years.
Startups are getting larger and larger. At least that’s the story venture capitalists and the media keep pushing out to us.
All you have to do is quit your job, code twenty hours a day, take a little investment funding and you too could become a billionaire tech founder.
The reality is different.
For every billion dollar unicorn, there are tens of thousands and possibly hundreds of thousands of companies that fail.
Why do we hear about all the wins and almost nothing about the losses?
Part of it is the survivorship bias. A logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility.
Billion dollar startups are extremely visible.
But, today, even successful startups are ridiculed for selling their companies for tens of millions of dollars. Aaron Patzer sold Mint for $170 million and has been ridiculed ever since.
It’s so bad that a phrase has been coined in the urban dictionary for selling out too early. It’s called pulling a Patzer.
I can’t make this stuff up.
When did a $170 million paycheck become a bad thing? That’s more than you, your family and all your friends combined will likely ever make.
It’s because of the race to become the next unicorn.
Mind you, many of these unicorns are unprofitable. Snapchat is losing money, Facebook took forever to find its footing, and Uber is hemorrhaging money.
Don’t get me wrong, some of these companies have revenue. Revenue isn’t and has never been the yardstick of a successful business.
You know what is? Profit.
Profit, in our current landscape, is secondary.
It’s scary that when the smartest men and women in our generation can attach a billion dollar valuation to a company that doesn’t have a working business model.
The investors and the entrepreneurs heading the companies are coasting until the next round of funding. Their only pray is that their runway doesn’t disappear before then.
With profit, there’s no such thing as a limited runway. Even one dollar in profit means you can run your business forever.
There are startups doing it. No, they’re not billion dollar companies. Well, except for Atlassian, they were considered un-fundable until they were already making tens of millions of dollars.
There’s a subset of startup founders who’ve chosen to build companies the old fashioned way – with their profits.
Instead of chasing growth at all costs, they’ve embraced creative problem solving and organic growth. They’ve turned their backs on the sacks of cash thrown their way. I guess they don’t like an investor who doesn’t know the basics of running a business telling them how to manage theirs.
They also seem averse the toxicity and turmoil that comes with chasing growth at all costs.
ConvertKit has made major inroads into the email marketing space. The founder invested thousands of his own money, hired the best talent he could find, and is the head of a company that’s on track to do twelve million dollars in revenue in 2018.
Buffer, the social media scheduling platform everyone loves, hasn’t taken investor money. They relied on a sustainable business model and sweat to arrive at sixteen million dollar projected revenue for 2018.
Litmus is a simple tool that allows users to test their designs on multiple email clients and mobile devices. They started with $800 and a used computer. They cracked a million dollars in revenue after their first year. They’ve been growing ever since.
None of these companies are worthy of being featured in TechCrunch as the startup that’s disrupting x industry. They’re doing something much more important.
They’re providing a service their customers need, employing people all over the world, and allowing everyone involved to live life on their terms.
Correct me if I’m wrong, but isn’t that why we start businesses in the first place?
At my tech company KyLeads, we made a decision from the very beginning – we’re not chasing investor money. It comes with a lot of strings and may force us to do things that aren’t in the best interest of the company or ourselves.
I don’t want to be the head of an organization like that. I’ll survive on our ability to deliver a solid product, great service, and profit.
We don’t want a vanity valuation.
We don’t want to sell for five hundred million dollars.
We don’t want to be on the front page of the tech blogs.
No, our goal is to build this thing for the next decade. Call it our life’s work.
Face it, you and I aren’t going to be the next unicorn.
Instead, I aim to be profitable from day one and build a company I love.
What about you?