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Comment by trevorturk | Hacker News Reader

I'm wondering why they need to raise money at all. Aren't they charging for their services? I'd feel more comfortable knowing that they're a self-sustaining business, as opposed to a startup that needs to raise money. Maybe there's a good reason, though...?

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You don't raise 10 million if you don't know what you're raising it for, to me this speaks of a fairly detailed plan on how they intend to spend that money.

Think of money that you can get your hands on before you've earned it as a growth accelerator. You could for instance stave off a potential competitor by grabbing a larger share of the market than you would have been able to do if you both relied on organic growth. In the arms races that start-ups are bound to find themselves in sooner or later a couple of million in hard cash can make an enormous difference in the long term outcome.

Yes, but specifically talking about Heroku, what do you suppose the plan is? If it were Engine Yard (at least the pre-EC2 version) I would know--they need to buy a lot of servers. But I figured Heroku would be able to stay a lean mean profit machine without taking big funding. Is their model out of whack? Too many free apps (aka marketing expense) to be subsidized by the paid ones?

If I were to hazard a guess I would say they are planning a very large roll-out with some heavy hitting marketing and they expect the free traffic to go through the roof for a while, significantly outpacing the normal conversion rate, and hence their ability to finance this out of their normal cashflow. Another option is that they intend to take over a competitor (EY you've already mentioned, I'm not even aware of any others in the ROR space, but there may be more), if that's it they'll be facing some major integration issues due to the different approaches.

But that's really looking at the tea-leaves, I have 0 evidence for any that.

It would make some sense though, given that they've ironed out a lot of the issues they had initially, their price points have been adjusted to the point where a lot of the users are happy (and I find it commendable how they worked with the userbase establishing how much was reasonable), the only thing they have to do now is sit back and watch it grow.

But they may have decided that sitting back and watching is not their style.

Time will tell, but I'll certainly be watching for any major announcement.

Tons of profitable businesses raise money. Sometimes it's the best way to scale to the next level or expand into a new market. It's wrong to assume they aren't profitable.

Sure - that's why I'm wondering if there's a "good reason" aside from that they need to raise money to remain in business. Maybe they'll be able to provide some more insight on their blog at some point.

Cloud computing seems really hot right now--maybe they take the money while it's there.

A company that doesn't need to raise money is in an awfully good position if they decide that they can use extra money.

$10 million is a huge amount, it sounds like they have huge plans.

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