Revenue != profit. Discord, like almost every 2010s SaaS startup, has revenue (from your Nitro) - but not nearly enough to cover expenses.
And for over a decade most companies talk only about revenue, which is infuriating. Because most startups and tech darlings survive only by continuous infusion of unlimited investor money.
My current startup is also not profitable, we're burning money but we're already signing big contracts and I hope in a year or two we keep growing rather than become profitable (1B+ valuation in a year).
Becoming profitable, even at this point is just a matter of deciding to stop expanding - but neither us nor our investors want this given there is so much potential for growth and more revenue streams on the line.
this is ycombinator's news aggregators, I suspect you're not going to get a "don't take risks and build things" vibe - it's a startup accelerator after all :).
They are either profitable or acquired :)
> Becoming profitable, even at this point is just a matter of deciding to stop expanding
Yeah, growth at all costs is one of the defining factors.
> it's a startup accelerator after al
The only business models for Y Combinator startups are:
- run indefinitely long on unlimited investor money
- get sold to the highest bidder at some nebulous market valuation
Becoming profitable never enters the picture :)
Why? Once a company has been acquired, does it automatically fall out of profitability?
If it's acquired in a stock sale, it remains an independent entity and still has a P&L
If it's acquired/merged in an asset sale (not usually a good sign), it can still be assessed whether the new division is profitable - except in some rare cases like Google (allegedly!) not wanting to itemize some of their divisions to avoid too much regulatory scrutiny on monopoly positions.
> Becoming profitable never enters the picture :)
Seems very wrong based on looking at YC's portfolio, which apparently includes a bunch of profitable startups
It becomes a part of the company that bought it?
> Seems very wrong based on looking at YC's portfolio, which apparently includes a bunch of profitable startups
It contains very few profitable startups. Those are the exceptions.
Not necessarily. As I explained above, most successful acquisitions are stock sales, in which case the acquiring company now owns the startup (they hold the shares). The startup is still a separate entity at this point.
Google is known for just merging the acquired startups into their product line (and/or killing them), but it's not a hard rule that all acquisitions are mergers.
For example, AFAIK Livestream is still a subsidiary of Vimeo (ie wholly owned, but separate): https://en.wikipedia.org/wiki/Vimeo_Livestream
So Livestream can be profitable or not, separately from whether its acquirer is.
Investors making long bets is a good thing, I’d argue.
There are a few outliers like "let's subsidize this price dumping until all competitors are dead and then we recoup money by being a de facto monopoly"
And besides my point was that it's pretty clear what their monetization is and that it's not some mystery
Citation needed. With this type of company and business model, it's highly unusual to be profitable, so the burden of proof is on those who say it is.
> Discord has raised a total of about $1 billion in funding. It has more than $700 million in cash on its balance sheet and the goal to become profitable this year, according to a person familiar with the matter.
https://www.theverge.com/2024/1/11/24034705/discord-layoffs-...
The fact Discord isn't profitable (and hasn't been) is well documented.
Also, operating at a loss isn't necessarily bad (i.e. if you expand or spend more on R&D your profits shrink). Companies might choose to spend more on R&D and not be profitable (e.g. Amazon for a long time).
Companies can operate at a deficit for many years without vanishing, usually because they have venture capital funding or investor backing.
If you can raise funds outside of revenue (i.e. outside of directly selling your products), you can keep operating even if you're not actually generating any income directly. Typically that will be in the form of investment and loans. So even if your expenses (incl. repayments for outstanding loans etc) are higher than your revenue, you can stay in business as long as you can convince enough investors that it's still worth their while to give you their money.
I don't know whether this is true for Discord specifically, but I understand it's a fairly common strategy, especially for companies where their best chance of success is by being the only player in a given market.
Oh, buddy. That's how it's supposed to work, but that is not how it works at all.
The strategy here is often just trying to operate at a loss longer than your competition. If your competition finally can no longer borrow, you buy them up and have a monopoly on the market, allowing you to price gouge.
There are other reasons a lender might lend to a perpetually-unprofitable company. For example, you might lend to a company to maintain a competitor who doesn't really compete, in order to avoid a monopoly breakup, or lend to a holding company that holds product with no intention to sell it, in order to maintain artificial scarcity (i.e. housing, diamonds).
Note that in none of these examples are you competing to provide the best products at the lowest prices.
https://www.theverge.com/2024/2/8/24065999/uber-earnings-pro...