This article vastly overestimates the value of tech buzz and considerably underestimates the value of revenue.
Buzzed about tech companies where their founders are giving talks, they get mentions on twitter, they're talked about on HN, etc., but that are actually going nowhere are a dime a dozen.
Revenue actually changes the underlying economics of your business so it's close to the essence of what a non-vanity metric is.
This article takes a really short-term and dismissive view of revenue. If you're at $1M ARR after a year, throw a party and invite all of your best friends -- you've done something that less than 1% of startups will ever accomplish. If you're at $1M ARR after a year, imagine where you will be after 5 years.
Of course, revenue is just part of the picture. You have to look at revenue growth, whether it's transactional or recurring, how monetization happens, the market opportunity, etc. etc. But I'm pretty confident that revenue is a better indication of how a company is doing than Facebook likes, Twitter mentions, web traffic, etc. that currently comprises the author's startup momentum index.
I can't help but suspect that this blog is a subconscious reflection of the state of the author's venture. SXSW not in the cards this year? Attending conferences is for chumps. Site not generating revenue? Revenue isn't important. Et cetera.
It's totally conscious, unsustainable revenue was our vanity metric for Referly. If you followed to Ecomom saga it was quite similar, we just pulled the plug sooner (and had no physical inventory).
As to SxSW, lol I can't deny I did enjoy taking that dig at all the attendees who should be at home working on their startups.
P.S. I've figured out you don't like me by now codex, but somehow I'm gonna win you over
Actually, I admire your courage to pivot refer.ly and I wish you all the best. I do like reading your articles but, unfortunately, I'm cursed with extreme, clumsy bluntness. That's really not as sexy as it sounds. I myself have terrible blind spots to my own flaws and failings, and I sometimes wish others were as blunt with me as I am with them. Sometimes niceties don't do anyone any favors.
This is an advertisement for an eventual product. We may as well be discussing the merits of Ron Popeil's latest blender infomercial. So let's stop voting up every ridiculous article submitted by this blog already and get back to real content.
All the points regarding why this post is so ridiculous have been thoroughly covered. I'm just pulling back the curtain on your exploitative use of HN as part of your grand marketing plan (in case it wasn't obvious).
I'm sorry. But the argument that there are more important things for companies than making money is getting old. Maybe it's because I'm from the Midwest (gasp!) and you're from the Valley.
Companies exist for one reason - to make money. It's their oxygen.
Have you earned the right to have this much attitude? Strikes me as odd that as someone building a startup about startups that you'd be so dismissive of others on HN - a startup heavy community.
I'm real. There are enough cheerleaders and I love many friends in the Midwest startup scene, but it doesn't help them to blow smoke up their asses. I'm from Seattle, another startup community in denial. It's time for an objective industry voice and it won't all be flattering.
Not sure if they're all "startups" but: Groupon, Starter League, 37signals, Food Genius, Fee Fighters, Spot Hero. All based in Chicago. Certainly not the Valley, but no need to be dismissive out of hand.
I didn't say they don't exist, what I am saying is that unfortunately very few have achieved broad adoption or brand recognition, so the revenue first mindset may not be serving them as well as the first commenter would lead you to believe. It is likely my index will give more non Silicon Valley companies credit for building value, even pre-revenue.
Revenue can be deadly friction in many early stage startups.
If you are in a market with network effects, you need to acquire users FAST. What would grow faster: Facebook monetizing each user from day 1 at $1 a user or Facebook growing fast, kicking in network effects, and delaying monetization. What would ultimately have more value?
So this isn't saying "don't make money", it's about examining the market you are in and making a strategic, thoughtful choice.
This is true for facebook, but false for 99% of other companies. At the end of the day, revenue - costs (profit) is what you're optimizing for.
I think dmor's point is that revenue can be a lagging indicator, and that some startups can suddenly turn on a revenue pump that makes watching revenue silly.
I agree with her - in 1% of cases. The problem is that for dmor, that 1% of cases is all that matters - because those cases are going to be the all or nothing billion dollar company cases, which is what she's aiming for. Facebook, AirBnB etc - all would have terrible numbers while starting up, then suddenly their numbers start to look great.
You're drastically overestimating how many people care about startups (and will pay for a product related to them). This is a small market and VC as an asset class is shrinking (so it's getting smaller). VCs are terribly intuition driven and the good ones already do what you're thinking of and they'e good at it. And even if they bought, it's less than 50.
If you're trying to build one of those shoot for the moon startups (the kinds VCs like), this idea won't be it.
This POV pidgeonholes startups into an investor dependent mindset.
Why raise 20k if you you'll make that next month?
Early Revenue is only bad for pump-and-dump startups that KNOW they'll never be profitable, but hope they can fool everyone long enough to get funding and make the company somebody else's problem.
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If the data _was_ in fact available, I have no doubt in my mind that it'd be one of the most important indicators.
This seems like an interesting way to justify shortcomings of dmor's momentum index. So:
- Mentions in TechCrunch > Revenue
- Conference presentations by CEO > Revenue
- Klout score > Revenue
This is some combination of naive, farcical or dumb.
Of course, you can throw out Facebook as an example of what over-optimizing for revenue would have done to them but this is survivor bias at its best. You could also look at Pets.com, Webvan and Kozmo from a bygone era to see what a poor monetization plan does. Note: it's not just revenue that is important but revenue > COGs.
(Note: Yes I know. This time is different. I'm an idiot.)
That same million after one year becomes 9 million the next and 80 million the year after that. Most people would kill for a 20% revenue growth rate per month.
I wonder how this mindset affected the failure of the original referly. Could they have shunned revenue in order to try and get more investment funding? This ultimately send them towards a pivot. A pivot that I'm still to understand. Dmor shows good promise with her data gathering, but I wonder where that fits into the pivot.
An annual run rate of 1 mil is an admirable goal that we should put on a pedestal, not wipe away with a dismissive "tiny business" label. If you're a founder, that should be your goal.
Buzzed about tech companies where their founders are giving talks, they get mentions on twitter, they're talked about on HN, etc., but that are actually going nowhere are a dime a dozen.
Revenue actually changes the underlying economics of your business so it's close to the essence of what a non-vanity metric is.
This article takes a really short-term and dismissive view of revenue. If you're at $1M ARR after a year, throw a party and invite all of your best friends -- you've done something that less than 1% of startups will ever accomplish. If you're at $1M ARR after a year, imagine where you will be after 5 years.
Of course, revenue is just part of the picture. You have to look at revenue growth, whether it's transactional or recurring, how monetization happens, the market opportunity, etc. etc. But I'm pretty confident that revenue is a better indication of how a company is doing than Facebook likes, Twitter mentions, web traffic, etc. that currently comprises the author's startup momentum index.