1. It's likely inherited from how investors look at startups. They are just focused on growth more than profitability.
2. In the US there are tax advantages to running costs through the business so these costs might be inflated and profit artificially reduced.
But yes, your argument stands for other kinds of startups.
Unlike something like e-commerce where 100k in monthly sales could be... 0 profit, or 70k in profit.
Source: I sell self-hosted software, my costs are mostly the domain names and a few $5/mo servers.
I run a SaaS and spend a few thousand per month for my hardware and software. And I wouldn’t want to spend any less and reduce my footprint,
Zendesk alone is over 1k. You can use a fake help desk software for half, but is it worth screwing with the bugs?
My CPU load is something like 200 CPUs 24/7, and needs to be fault tolerant on top of that. Also needs to run without a sysadmin on my side.
Revenue/cost = profit margin.
There's usually three ways to increase profit margin: economics of scale (sell more units), economy of scope (sell more to the same customers), or innovation (lower cost/increase prices)
All these three are usually linked to revenue in some way. 3 customers and 3000 customers may be roughly the same hosting cost. If you can sell someone a $100 item, you can sell them a $1000 plan later or simply a $1 item for very little marketing fees. Or if you're outsourcing something that could be built in house, it makes sense to hire a team to build and maintain that process once the cost gets high enough to justify new hires.
The other more common answer is revenue is hard to manipulate, while profits are very easy. Buy and furnish a new office and then your cost suddenly hits $3m that month.
Anyone who takes any kind of venture capital is expected to have negative profits. They can hire contractors, outsource social media marketing to agencies, outsource hiring contractors to agencies, and so on. Uber used to buy cars and then sell them to their drivers, to get more drivers. Grab gave out free phones so taxi drivers could download the app.
Startups aren't about profits, they're about growing an asset as fast as possible and then selling it off to someone who can utilize same asset for higher value. e.g. YouTube and WhatsApp don't bring in money themselves, but work very well into Google and Meta strategically.
It's also common to seed "marketing cost" into unsustainable coupons/discounts and such. That's unhealtht revenue, but it's also why unit economics (the cost of one unit sale) is another metric. Turns out it's bloody difficult to fix unit economics. But this is why people check that unit economics are positive and then read MRR.
As a result, the majority of SaaS businesses aren't profitable, and people talk mostly about MRR.
> Monthly Recurring Revenue (MRR) is the income that a company expects to receive in payments on a monthly basis. MRR is a critical revenue metric that helps subscription companies to understand their overall business health profitability by keeping a close eye on monthly cash flow.