Comment by nbashaw | Hacker News Reader

Comment by nbashaw | Hacker News Reader

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Actually we had a pretty detailed financial model for how we expected to get to profitability! We currently have ~1,200 subscribers, and about half are paying us $1.99/mo (our old price point) and the other half is paying $3.99/mo. Our growth model is based on people sharing our content, and so we can predict pretty well how many new customers we'll get every time we post something new. With a $15k monthly content budget (a couple writers, network of freelance designers) we were pretty sure we'd be able to bend the growth curve to the point where we'd reach profitability (~15k subscribers) in about 10 months, assuming modest improvements in conversion rates and share rates (we'd obviously be doing a ton of experiments to move these numbers).

At the end of the day, investors weren't convinced, so you certainly have a point! There may have been something seriously wrong with the plan. But I challenge your assertion that we'd need "big growth just to survive". Yeah we'd need pretty good growth, for sure. But not "unrealistic, crazy unlikely" growth.

And on the upside, once we got there, all growth would be pretty much pure margins after that! We don't think we'd need to dramatically increase our investment in content.

Basically, it might not be as dumb as it seems.

I'd assume most investors are not really interested in you reaching profitability. In fact it's probably a negative for them.

What they want of for you to reach a high valuation which allows them to get a +10x return on their investment. What they want is for you to need more money from them in order to survive, so if they believe in the play they can increase their stake.

At some point they want liquidity. But that doesn't have much to do with your profitability.

Honestly, you probably know better than me. But this has been my limited experience.

"But I challenge your assertion that we'd need 'big growth just to survive'"

You say this while literally telling me that your big hope was to get a pile of money so that you could "bend" your growth curve towards reaching bare profitability after about another year. When would a realistic assessment of your actual growth curve say you'd reach that point? Was there enough customer base that you could actually reach to get to that point, much less beyond?

I won't call your plans "dumb", but the whole startup approach is one that almost always fails, even compared to starting other businesses. It's really hard to call it "smart".

I feel like your pricing is too low, and you needed to be closer to Audible prices.

I feel like your marketing plan relied on too many perfect things to happen. You should also consider that the more you exploit a specific marketing channel, the less it tends to work. I think it's a tough sell to convince investors to put money into something that will only get you to your targets if your conversion and share rates improve.

Super curious about a bunch of things here:

1. Are those numbers inclusive of Apple taking a 30% cut?

2. You have a $15k per month content budget, but what about other overhead? Does the 15k subscriber number for profitability cover that too?

3. How is churn?

4. What's your CAC and LTV?

Most importantly: you talked to dozens of investors, some of them probably smart and experienced. Why did they say they didn't think it would work?

They might be wrong, obviously, but I'd be curious to hear their main objections.

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