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Comment by pbreit | Hacker News Reader

The author provides a snarky pre-response to those who point out that virtually every IPOing company is unprofitable (IPOs are fundraising events, after all) and that such a "risk factor" is S-1 boilerplate going back decades.

And proceeds to gloat over not understanding Business 101 ("invest money to make money").

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One question, is how is "profit" defined? For example, if a company has surplus cash based on a given base of assets and current operating expenses, then that surplus is typically profit. However, if that surplus is used to buy new assets or pay down debt principle, I would consider that to be similar to profit because it tells me that the company would be profitable if it wasn't expanding (or, that it will be profitable once the debt is paid off, assuming all else remains the same).

Profit means income exceeds expenses for a given period of time. There are different types of profit, i.e., gross profit, is just the profit on the primary business activity (sales or services income), while net profit is the profit after all expenses are taken into consideration. There's also cash-flow profit, which is gross profitability adjusted for some but not all non-operating expenses.

And just to make things even more confusing, there's unicorn accounting profit, in which gross bookings as treated as revenue even though they are never earned by the startup (think Groupon, GrubHub, etc.).

Its defined by whatever accounting standard they are used. Profit is usually income less costs required to bring in that income. In your example the that surplus isn't profit. That's more of a balance sheet item, so an asset. If you have $10m in cash and buy say a factory, that doesn't effect your profit

Historically, most companies that IPO are profitable, and were going public to scale their profits with additional investment. It is mostly a Silicon Valley thing to IPO when unprofitable, and especially to IPO before a path to profitability has even been identified.

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