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“I hate high margin businesses,” “Donald”, the billionaire VC and head of Donald Ventures said to me.
I ignored him, and continued on with my pitch knowing he would never fund us. I mean, after all, how do you respond to an idiotic comment like that?
A couple year of years later I was meeting with the same VC (yes, he actually funded us which is a much longer and crazier story). Before the meeting I was talking with one of Donald’s partners, and I asked “Raul” why Donald had this belief system about high margin startups.
Raul’s answer was insightful. He said, “Donald only cares about revenue growth, not the profitability of the business.
“Donald believes that if your business keeps growing at a fast rate then you can always find another investor who will put more money in at a much higher valuation.”
In other words, Donald is saying, “Profitability? Who cares? We just need to find another fool that will get excited by the high growth. Then we can eventually sell the company or dump the company on an unsuspecting public in an IPO.
