Hacker News Reader

Facebook was already profitable pre-IPO and was forced to go public because of some security law involving the number of investors.

But the number of tech startups that go public is small. Only one YC backed company has ever gone public - Dropbox. And it seems to be proving Steve Jobs right. It was never a product, it was a feature. It still doesn’t have a clear road to sustainable profitability.

Even out of the few that have gone public within the last 10 years, most of the tech darlings still haven’t become profitable.

PagerDuty (YC S10) is also a public company: https://www.marketwatch.com/story/pagerduty-stock-skyrockets...

And they lost $12 million last year so just like Dropbox. They still aren’t profitable.

> But the number of tech startups that go public is small. Only one YC backed company has ever gone public - Dropbox.

I think the real irony is that AirBnB is their biggest darling, and it's not a tech company. The history of that company is very interesting, going back to Paul Graham making a note of them being the first founders without a technical background to get into YC (the third cofounder who is technical was added to the roster later on, or at least given the title).

That said, I have high hopes for Stripe, Ginkgo Bioworks, Gusto, Docker, Gitlab, and some of their other companies (not that they'll necessarily go public, but that they'll become real companies - I'd argue this describes twitch).

How will Docker and Gitlab become self sustaining when other companies like ElasticCo, Mongo, etc couldn’t?

I think Docker is ubiquitous enough that there is a real market for it. It even plays well with Kubernetes. I don't know enough about their pricing model and churn to comment on their viability with much certainty.

Maybe I'm being too optimistic with Gitlab. I know next to nothing about their business, other than hearing good things from people who have used it.

That said, I doubt I would've seriously considered investing in any of them except for Stripe until the previously listed companies had shown significant traction. I'm actually somewhat pessimistic about AirBnB's valuation 5-10 years from now compared to today.

But then, I thought for sure the iPhone was going to flop. So what do I know?

Docker as a technology is ubiquitous, but the tech landscape is littered with money losing companies trying to profit off of open source software.

Docker is just as much in danger of being clobbered by the cloud providers as ElasticCo, Mongo and all of the other open source companies. AWS is making money off of us running Docker. Docker itself is not making any money from us.

I think that this is correct. The barrier to entry for producing software is very low because in many cases, coding does not require any capital. It should be a highly competitive industry with many alternatives to choose from, but it's not; this is because of VCs.

VCs use their capital and connections to create moats around their investments to make their industry unprofitable for all competitors.

> I fear venture capital (and Silicon Valley) is much more about value extraction than value creation these days.

If you think about it, most of the venture capital goes in financing duds. That's an unfortunate truth about entrepreneurship. So a VC is more or less forced to extract as much value as possible from the successful ones. Not saying it is right or wrong but stating the way things are working.

Once upon a time, successful businesses were also profitable.

> The VCs do everything they can to drive up the valuation, except make money. They then sell their shares to the public markets for an incredible profit...

The VCs are still locked in and haven't been able to sell afaik? The public markets have 6 months to figure out fair price before they get theirs

Softbank has used it's collateral in WeWork & Uber to take out secured loans.

Effectively bypassing the lockup period, and insuring any downside to the share price for the cost of the interest on the loans, while maintaining the opportunity for any upside.

They've effectively done one better than just selling the stock.

LabRats is a pretty good book, which talks about this phenomenon

This is why I'm staying out of much of tech and the current stock market.

We were taught as children the market returns 7%/yr. People took this too seriously.

This has all the signs of the housing bubble.

In the meantime, the market is up 20% since January and PE ratios for the largest companies are still reasonable. Uber’s success or failure has no bearing on the broader health of the market.