When Does Your Startup Need To Be Profitable?

I really respect Steve Blank. He’s got a great view of startups, venture capitalists, and the startup ecosystem as a whole. Plus, he’s viewed as the Godfather of the lean startup movement, so what’s not to like?

Picture: Depositphotos

Blank, 68, has been around a long time, and he’s seen how venture capital has changed from what it was to what it is today. And, he’s not a fan:

“The role of venture capital was to teach you how to turn your idea into a profitable company. The role of venture capital now is the greater fool theory.” Steve Blank

The reason startups are struggling to hit profitability is because they don’t have to be profitable any more.

Blank’s right. The incentive system has changed. The bottom line doesn’t matter any more to many venture capitalists. All that matters is growth at all costs.

The concept is really simple:

1. Grow your top line at all costs, so…
2. The valuation of your company keeps increasing, so…
3. You can raise more money at a higher valuation without regard to profitability, so…
4. You can repeat the process over and over again