Ask HN:Do companies make up the VC money they burn during startup stage via IPO?

2 pointsavrgamp2 comments

We see a lot of companies that burn VC money by giving away discounts, rewards, etc. Moreover, many of them don't make profits even after years. If they happen to become profitable and go for an IPO, do they recover the money spent during the pre-IPO years?

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VCs make plenty of profit, selling on the companies they bought. It doesn't matter whether the companies are profitable.

It's a simple model: if you are a VC and you spot an idea, preferrably with an edgy and marketable founder, you throw money at it until you've got 50 million sticky users. Doesn't matter too much what it costs. Lets says its 200 mil.

You then find a unicorn to buy it for 500 mil, either to take you out of the space (if it's a threat) or just to buy your userbase and the sweet sweet data you have on them.

If you can't find a buyer, you hype the shit out of it and place an IPO, becuase retail investors will buy anything.

You can't lose.

Can't agree more!

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