

Revenue vs. Value - dmor
http://www.daniellemorrill.com/2013/05/revenue-vs-value/

======
smalter
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.

~~~
coolsunglasses
Sour grapes are at play in the original content.

------
codex
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.

~~~
dmor
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

~~~
codex
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.

~~~
dmor
Oh, those are qualities I understand all too well, so I guess we are fellow
travelers. Months of curiousity satisfied.

------
justinbeaver
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.

~~~
dmor
I should hope to be as successful as Ron Popeil! Also, weak sauce argument on
your part. Try again

~~~
justinbeaver
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).

~~~
dmor
I love that anyone thinks I have a grand marketing plan

~~~
justinbeaver
The "aww shucks" card isn't going to fly. This is very much a content
marketing campaign and HN is the soapbox right now.

~~~
dmor
I troll harder

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timjahn
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.

~~~
dmor
Maybe you should ask yourself why the only Midwest startup I can think of is
Dwolla?

~~~
pkmehta
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.

Interesting PR strategy.

~~~
dmor
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.

~~~
pkmehta
Your conflating two unrelated things here - being objective (or real) and
being dismissive.

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rafaelc
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.

~~~
_lex
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.

~~~
dmor
Their revenue numbers maybe, but there were other signals. I am gonna find the
next Airbnb with what I'm building mark my words

~~~
pkmehta
If you can really do that, become a VC or full-time angel vs. starting some
silly startup index SaaS platform.

~~~
dmor
Nah that path is too obvious, I'm making the new Dow Jone Industrial index.
Way less plausible, way more fun.

~~~
pkmehta
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.

Not being a hater.

~~~
dmor
Don't care about exit size anymore, it's all about blowing shit up and
changing the world. ;)

------
hayksaakian
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.

\-----

If the data _was_ in fact available, I have no doubt in my mind that it'd be
one of the most important indicators.

------
pkmehta
Revenue is a vanity metric. That's a new one.

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.)

------
thesis
20% revenue growth each month isn't sexy? That's crazy.

~~~
pg_bot
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.

~~~
dmor
I agree, not sexy != not awesome

------
orangethirty
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.

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cglee
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.

~~~
pkmehta
VCs don't like that type of company. As a result, you should not aim for that
goal.

~~~
cglee
Why do you care what VCs like. Making a mil a year (or run rate of 1 mil)
should be the goal, not impressing VCs.

~~~
pkmehta
Sorry - sarcasm never translates well in writing. I totally agree with your
point. Apologies for confusion.

