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Comment by belter | Hacker News Reader

Going from their financials, Squarespace makes no money: Revenues of $281.1 million for Q1 with Net Income of $0.1 million so it can be rounded to $0. They have debt of $556.9 million so yes, for the founder being able to pass on this pig with lipstick is great.

Permira is well known for what was their management approach with AA in the UK, so for the employees this will probably mean massive layoffs soon.

https://www.theguardian.com/business/2007/feb/23/privateequi...

"MPs accuse owners of asset stripping AA motoring group" - https://www.independent.co.uk/news/business/news/mps-accuse-...

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Those numbers don't tell you that Squarespace is a pig with lipstick. It might be one! But, SAAS economics treat the ability to hit near-zero profitability as a feature of the business model, not a problem.

Here's why -- income is taxed, and growth is rewarded, heavily, in the valuation of the company. If every dollar of business you make is worth $6 (Roughly $1.2bn in revenues = $7bn buyout), and every $1 of new business you earn costs $1, then by spending all your cash, you make 5x on it. In the alternative, you can keep $0.78 / dollar, so the net gain versus keeping earnings is $4.22. I like that trade, and I'd make it as the CEO of Squarespace.

What's unusual about SAAS companies is how easy it is to manage this part of the business economics as compared to, say a bean factory. Much of the spend is digital marketing, and sales teams are much easier to scale up and down than say factories.

Sales growth for 2023: 17%

https://www.cnbc.com/quotes/SQSP?tab=financials

So, we've achieved growth-valuation stasis: $1 in growth = $1 in valuation, give or take, Time to sell the company, or re-trench it for margin. Or both, in this case.

The people that don’t get this are the people that want their startup to turn a profit by next Tuesday.

You mean to tell me the best thing you can do with that revenue is put it in your pocket? There’s no way to spend it on your business to make more money? Sounds like you don’t have much of a startup then.

Something is really wrong in this market when even a "successful" company like Squarespace deson't manage to be a profitable business.

It sounds like investors invested billions of dollars making a product that makes million dollars per quarter?

So from that perspective, was this ever a successful company or just a grand party thrown by the investors? Isn't this just "how it works" ?

The vast majority of investors in the railroads lost their money; lots of people lost money running fiber around the world, iridium went bankrupt and lots of people use those phones, etc.

Not all investors are looking for the business to be profitable. NVidia investing in AI companies drives up demand for AI chips. NVidia is simply seeking to create a prisoner's dilemma around AI compute spending. If Nvidia is successful, then most of the money they invest will flow back into their coffers as margin + the forced spending by other parties to keep up.

Headcount and marketing spend required to be perceived as "successful" in the industry is commensurately high.

Because companies chose to not be profitable and invest all their money into growth.

Are they actually successful or just succeeded in marketing their brand recognition. Probably with absolutely massive spend... Just how many people are in their market with whatever monthly spend they have.

If you look at the past 10 years (or more) this has been the case with nearly every single poster child of successful US tech company.

Look at YCombinator's top/most darling startups. Hardly any of them are profitable or sustainably profitable

Seems like the model has been to sell it to the next sucker all along: an acquisition by a bigger company, the stock market, or just another PE company.

Never to actually create a proper business...

My old fashioned view is, and notwithstanding periods of debt for grow investment, if you don't make a profit, you don't have a business.

If you have enough money, you can kill a lot of viable businesses though.

If growth is the goal, you sacrifice margin for revenue

And sometimes you sacrifice solvency as well?

Gambling on exponential growth and then having the growth fall short (say, because people moved their personal web sites to facebook instead of squarespace) is a risk in any time you go big or go home. Sometimes (often!) you ... go home.

I would say most of the time you sacrifice solvency

This is insane. I can't imagine (and be bothered to look if it's available) how much percentage of this is dedicated to marketing, but it must be a massive part.

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