I can see that. Why limit your revenue by a potential $1m/year because you don't want to spend the extra $50,000/year (for example).
At the same time when you start out saying "I need to pour millions into this idea to make a single dollar back", I start questioning whether it's a viable idea in the first place. Granted, some ideas/problems do require expensive solutions: converting from our current transportation system to driverless cars cannot be done on the cheap. However, if I was an investor, I'd be picking startups running out of someone's basement on a farm in Iowa, rather than someone that wants to use my money to open a lavish office in NYC.
Then again, I'm not an investor, so I have no idea what I'm talking about :)
> "I need to pour millions into this idea to make a single dollar back", I start questioning whether it's a viable idea in the first place.
In the late 90's, Google had tens of millions of dollars in funding, and took 3 years before it started making revenue, with the launch of Adwords in October of 2000.
Yes, if it takes you $5 to make $1, then something is probably wrong. But, if it takes you $1.10 to make $1 and there's a clear path to efficiencies/economies of scale, then maybe you're on to something.
"But, if it takes you $1.10 to make $1 and there's a clear path to efficiencies/economies of scale, then maybe you're on to something."
I agree with everything you've said, but the latter part of that sentence is easily overlooked when the money is flowing freely: there are a lot of big-name startups right now who sure seem to have business models that are the equivalent of selling dollars for 95 cents. You hear a lot of things that sound like "if only we can solve this NP-complete problem and/or ultra-efficiently operationalize labor-intensive tasks that have been the bane of much larger companies for decades, we'll print money!" If only...
In particular, you can hand-deliver low-margin things (that people clearly want) and goose your revenue like crazy...but can you do it profitably in the long run? I'll bet you a Kozmo messenger bag that you can't.
This is more of a problem in the valley than elsewhere. People so techno-utopian that they sometimes forget to ask basic questions of feasibility, because revenue growth.
That said, I have no idea how you get to hundreds of millions of dollars in funding without someone taking a step back and saying: "hey, wait a second...are there unit economics here?" That's just nuts.
At the same time when you start out saying "I need to pour millions into this idea to make a single dollar back", I start questioning whether it's a viable idea in the first place. Granted, some ideas/problems do require expensive solutions: converting from our current transportation system to driverless cars cannot be done on the cheap. However, if I was an investor, I'd be picking startups running out of someone's basement on a farm in Iowa, rather than someone that wants to use my money to open a lavish office in NYC.
Then again, I'm not an investor, so I have no idea what I'm talking about :)