At that stage of a business, you wouldn't be taking seed-stage or series-A funding; it'd be series-B or series-C — where the type of investors who do those investments are just as risk-averse as banks, and are looking at essentially the same things banks look at.
At that stage of a business, you know there isn't anything on the horizon that'll kill your share price. Your market cap is stable (save for the growth you're trying to enable.) So you should be extremely wary to let go of any more equity. You should highly prefer debt-backed investment (i.e. loans) over equity-backed investment, because your equity value increase from the growth should be predictably paying off that debt, and then some, likely the same fiscal year you take on the loan. Selling any equity at that period in a company's growth is throwing earnings down the drain.
You can't. Be serious.
Most startups have no revenue. What bank would lend you money?
And 10% interest to preserve your cap table and board?
For example, the company has been growing 2x per year for the last few years and there's a good chance this will continue for the next several years. But only if the company invests a massive sum of money with a substantial risk.
I'd like a pony while you're at it.
While I respect your decision, if we are talking about technical exposure to interesting challenges, I think you're leaving a lot on the table by defaulting to no-hire.
I kid.
Most of the non crypto companies were not profitable when they IPOd the last few years and many still are barely profitable.
We can say the same about companies that made open source software and we’re going to make money via “services or supper contracts”. That hasn’t worked out well for mLabs or ElasticCo.
Most startups are just Ponzi schemes.
The crypto whataboutist apologies are something else.
Sounds like a good investment to me.
1. Amazon had positive margins early on and was reinvesting money to build infrastructure and real assets. Most startups aren’t. All Bezos had to do to turn a profit at any time is stop building warehouses.
2. Amazon completely pivoted and almost all of its profit comes from AWS. And no Amazon did not use excess capacity to start AWS. It was built from the ground up as a separate service [1]. Every company likes to point to Amazon and say we can do it too. That’s just like a company claiming if they bring their former CEO back after 10 years they can become a three trillion dollar company.
And standard disclaimer since you brought up Amazon, I work at AWS.
[1] https://readwrite.com/popping-the-amazon-web-services-capaci...
How is that a Ponzi in any sense? It’s not like Elastic makes money from selling its own stock on endless promises. The product exists, works, and generates a billion dollar in sales. The valuation may not be attractive, but it seems clear to me that this can be a profitable and stable business if they decided to stop buying growth.
https://www.elastic.co/about/press/elastic-reports-strong-se...
What is Elastic doing to “buy growth”?
If they stopped doing those things and just served the existing customers who bring in the $1B revenue today, I’m guessing they could be profitable fairly quickly and start paying dividends (or returning capital through stock buybacks).
But that kind of stable enterprise software company would be mostly attractive as a takeover target for a larger player or private equity; it’s not the story that investors in public markets want to hear. So Elastic’s valuation would be slashed.
This doesn’t make the company a Ponzi though. Seeking growth is a valid strategy and one that’s still sought out by many investors despite the valuation correction from last year.
"Ponzi scheme" has a specific meaning. Many cryptocurrency projects appear to fairly closely fit this meaning, while "for-profit business that's making year after year of losses and being propped up by VC funding" does not.
Not everything that's a very bad investment—or even outright fraud—is a Ponzi scheme.
BTW, the party has stopped for non profitable companies.
Most startups (in the tech sense) are ventures. They are attempts to generate new cash flows and create something new that didn't previously exist (or a new twist on something that already existed).
They are unproven. They are risks. But the vast majority are not Ponzi schemes.
1. Investors pour money in to companies not hoping that they become profitable. But hoping they can get their money back via an IPO while they are still not profitable.
2. The investment bankers dump their allocation at IPO and get to take advantage of the hype. Then sell the stock to retail investors.
3. The retail investors fall for the hype even though the company still isn’t profitable and the stock price drops?
That’s the definition of a “Ponzi scheme”. Everyone throws good money after bad hoping that there is a “bigger fool”.