Should startups care about profitability?

There are certain topics that even some of the smartest people I talk with who aren’t startup oriented can’t fully grok. One of them is whether profitability matters. It’s common cocktail party chatter to hear people confidently pronounce that some well known startup is sure to blow up.

Or you know the other one — the one where Snapchat lost $2 billion in just one quarter. Two-fucking-billion! What a disaster! Except that they didn’t actually lose $2 billion in cash. It was a stock option incentive related “expense” but I bet you didn’t know that because in an era where we only read the headlines — they must be a train wreck losing billions. (They actually lost about $175 million in cash in that quarter, FWIW. See appendix if you want to know more on this.)

“How could they succeed when they’re not even profitable!”

If you hire 6 senior sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business for 6 months. Your profitability will go down for 2 quarters while your growth may increase dramatically in quarters 3–12.
I know this seems obvious but I promise you that even smart people forget this when talking about profitability. 70–80% of the costs of most startups are employee costs so what you’re really talking about when a company is unprofitable is that they are growing their staff ahead of their revenue.

Should startups care about profitability? More news at 10

There are certain topics that even some of the smartest people I talk with who aren’t startup oriented can’t fully grok. One of them is whether profitability matters. It’s common cocktail party chatter to hear people confidently pronounce that some well known startup is sure to blow up.

Or you know the other one — the one where Snapchat lost $2 billion in just one quarter. Two-fucking-billion! What a disaster! Except that they didn’t actually lose $2 billion in cash. It was a stock option incentive related “expense” but I bet you didn’t know that because in an era where we only read the headlines — they must be a train wreck losing billions. (They actually lost about $175 million in cash in that quarter, FWIW. See appendix if you want to know more on this.)

“How could they succeed when they’re not even profitable!”

If you hire 6 senior sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business for 6 months. Your profitability will go down for 2 quarters while your growth may increase dramatically in quarters 3–12.
I know this seems obvious but I promise you that even smart people forget this when talking about profitability. 70–80% of the costs of most startups are employee costs so what you’re really talking about when a company is unprofitable is that they are growing their staff ahead of their revenue.

One thing separates creators from consumers

Enterprise applications are complex — there is an insane amount of information that is to be displayed that contains data from various sources, modules and users. There are complex graphs, usage patterns, and lists of data that need to be skimmed through before one can make sense of what the console is getting at.

“The biggest challenge with designing enterprise applications is the lack of examples of patterns that work or don’t work in specific scenarios.”

Since most enterprise applications contain sensitive data pertaining to the company, there are very few examples out there that talk to some of the common problems faced while designing enterprise apps. There exists pattern libraries that talk in-depth about how each component should work but very little on when to use them. The patterns we see in design libraries are often oversimplified and does not work in real enterprise applications where data and the use-cases are more complex in nature.

What you see below is a typical enterprise application. The working window is dense with information with a crazy number of panels each indicating information that is contextual to any other selection made on the screen.

One thing separates creators

Enterprise applications are complex — there is an insane amount of information that is to be displayed that contains data from various sources, modules and users. There are complex graphs, usage patterns, and lists of data that need to be skimmed through before one can make sense of what the console is getting at.

“The biggest challenge with designing enterprise applications is the lack of examples of patterns that work or don’t work in specific scenarios.”

Since most enterprise applications contain sensitive data pertaining to the company, there are very few examples out there that talk to some of the common problems faced while designing enterprise apps. There exists pattern libraries that talk in-depth about how each component should work but very little on when to use them. The patterns we see in design libraries are often oversimplified and does not work in real enterprise applications where data and the use-cases are more complex in nature.

What you see below is a typical enterprise application. The working window is dense with information with a crazy number of panels each indicating information that is contextual to any other selection made on the screen.

What to do if tour product isn’t growing

As a founder, product lead at Pinterest and PM for a couple products at Google, as well as a growth partner for Initialized Capital, I’ve seen many product teams struggle to grow. Many products start out with a bang. Some find product-market fit with sustained growth. A few have gone through spurts of hyper-growth. But more often than not, I’ve seen most of them linger then fizzle.

“Founders launch their product, wonder why it isn’t growing like gangbusters and then immediately try to fix their growth problem.”

They turn to growth tactics like optimizing their on-boarding funnel, SEO or push notifications before really understanding what they are building and who they are building for. This may create an initial burst of short-term growth.

But it ultimately leads to high churn of your possible customers, while ignoring problems in the core product.
Before trying different growth tactics like throwing spaghetti at a wall, startups need to take a fresh look at their users, evaluate their product end goals and re-define the journey they want their users to take to get there. Here are some tips that can help define a path which will clarify the different steps needed to unlock product growth.

What to do if tour product isn’t growing

As a founder, product lead at Pinterest and PM for a couple products at Google, as well as a growth partner for Initialized Capital, I’ve seen many product teams struggle to grow. Many products start out with a bang. Some find product-market fit with sustained growth. A few have gone through spurts of hyper-growth. But more often than not, I’ve seen most of them linger then fizzle.

“Founders launch their product, wonder why it isn’t growing like gangbusters and then immediately try to fix their growth problem.”

They turn to growth tactics like optimizing their on-boarding funnel, SEO or push notifications before really understanding what they are building and who they are building for. This may create an initial burst of short-term growth.

But it ultimately leads to high churn of your possible customers, while ignoring problems in the core product.
Before trying different growth tactics like throwing spaghetti at a wall, startups need to take a fresh look at their users, evaluate their product end goals and re-define the journey they want their users to take to get there. Here are some tips that can help define a path which will clarify the different steps needed to unlock product growth.

Half of What We Know About Coffee is Wrong

[vc_row][vc_column][vc_column_text css=”.vc_custom_1507722769727{margin-bottom: 23px !important;}”]The old man was thin and gaunt with deep wrinkles in the back of his neck. The brown blotches of the benevolent skin cancer the sun brings from its eflection on the tropic sea were on his cheeks. The blotches ran well down the sides of his face and his hands had the deep-creased scars.lines at and the steady good had the deep-creased scars. They sat on the Terrace and many of the fishermen made fun of the old man and he was not angry. Others, of the older fishermen, looked at him and were sad. But they did not show it and they spoke politely about the current and the depths they had drifted theirlines at and the steady good weather and of what they had seen.
The successful fishermen of that day were already in and had butchered their marlin out and carried them laid full length across two planks, with two men staggering at the end of each plank, to the fish house where they waited for the ice truck to carry them to the market in Havana. Those who had caught sharks had taken them to the shark factory on the other side of the cove where they were hoisted on a block and tackle, their livers removed, their fins cut off and their hides skinned out and their flesh cut into strips for salting.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_single_image image=”11660″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154483781{margin-bottom: 30px !important;}”][/vc_column][vc_column width=”1/2″][vc_single_image image=”11661″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154497588{margin-bottom: 30px !important;}”][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”11662″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154510891{margin-bottom: 25px !important;}”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507722983215{margin-bottom: 15px !important;}”]When the wind was in the east a smell came across the harbour from the shark factory; but today there was only the faint edge of the odour because the wind had backed into the north and then dropped off and it was pleasant and sunny on the Terrace. They walked up the road together to the old man’s shack and went in through its open door. The old man leaned the mast with its wrapped sail against the wall and the boy put the box and the other gear beside it.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507723032375{margin-bottom: 0px !important;}”]

Great things in business are never done by one person. They’re done by a team of people.
Steve Jobs

[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507727783792{margin-bottom: 17px !important;}”]They sat on the Terrace and many of the fishermen made fun of the old man and he was not angry. Others, of the older fishermen, looked at him and were sad. But they did not show it and they spoke politely about the current and the depths they had drifted their lines at and the steady good weather and of what they had seen.[/vc_column_text][/vc_column][/vc_row]

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[vc_row][vc_column][vc_column_text css=”.vc_custom_1507722769727{margin-bottom: 23px !important;}”]The old man was thin and gaunt with deep wrinkles in the back of his neck. The brown blotches of the benevolent skin cancer the sun brings from its eflection on the tropic sea were on his cheeks. The blotches ran well down the sides of his face and his hands had the deep-creased scars.lines at and the steady good had the deep-creased scars. They sat on the Terrace and many of the fishermen made fun of the old man and he was not angry. Others, of the older fishermen, looked at him and were sad. But they did not show it and they spoke politely about the current and the depths they had drifted theirlines at and the steady good weather and of what they had seen.
The successful fishermen of that day were already in and had butchered their marlin out and carried them laid full length across two planks, with two men staggering at the end of each plank, to the fish house where they waited for the ice truck to carry them to the market in Havana. Those who had caught sharks had taken them to the shark factory on the other side of the cove where they were hoisted on a block and tackle, their livers removed, their fins cut off and their hides skinned out and their flesh cut into strips for salting.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_single_image image=”11660″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154483781{margin-bottom: 30px !important;}”][/vc_column][vc_column width=”1/2″][vc_single_image image=”11661″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154497588{margin-bottom: 30px !important;}”][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”11662″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154510891{margin-bottom: 25px !important;}”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507722983215{margin-bottom: 15px !important;}”]When the wind was in the east a smell came across the harbour from the shark factory; but today there was only the faint edge of the odour because the wind had backed into the north and then dropped off and it was pleasant and sunny on the Terrace. They walked up the road together to the old man’s shack and went in through its open door. The old man leaned the mast with its wrapped sail against the wall and the boy put the box and the other gear beside it.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507723032375{margin-bottom: 0px !important;}”]

Great things in business are never done by one person. They’re done by a team of people.
Steve Jobs

[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507727783792{margin-bottom: 17px !important;}”]They sat on the Terrace and many of the fishermen made fun of the old man and he was not angry. Others, of the older fishermen, looked at him and were sad. But they did not show it and they spoke politely about the current and the depths they had drifted their lines at and the steady good weather and of what they had seen.[/vc_column_text][/vc_column][/vc_row]

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[vc_row][vc_column][vc_column_text css=”.vc_custom_1507722769727{margin-bottom: 23px !important;}”]The old man was thin and gaunt with deep wrinkles in the back of his neck. The brown blotches of the benevolent skin cancer the sun brings from its eflection on the tropic sea were on his cheeks. The blotches ran well down the sides of his face and his hands had the deep-creased scars.lines at and the steady good had the deep-creased scars. They sat on the Terrace and many of the fishermen made fun of the old man and he was not angry. Others, of the older fishermen, looked at him and were sad. But they did not show it and they spoke politely about the current and the depths they had drifted theirlines at and the steady good weather and of what they had seen.
The successful fishermen of that day were already in and had butchered their marlin out and carried them laid full length across two planks, with two men staggering at the end of each plank, to the fish house where they waited for the ice truck to carry them to the market in Havana. Those who had caught sharks had taken them to the shark factory on the other side of the cove where they were hoisted on a block and tackle, their livers removed, their fins cut off and their hides skinned out and their flesh cut into strips for salting.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_single_image image=”11660″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154483781{margin-bottom: 30px !important;}”][/vc_column][vc_column width=”1/2″][vc_single_image image=”11661″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154497588{margin-bottom: 30px !important;}”][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”11662″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154510891{margin-bottom: 25px !important;}”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507722983215{margin-bottom: 15px !important;}”]When the wind was in the east a smell came across the harbour from the shark factory; but today there was only the faint edge of the odour because the wind had backed into the north and then dropped off and it was pleasant and sunny on the Terrace. They walked up the road together to the old man’s shack and went in through its open door. The old man leaned the mast with its wrapped sail against the wall and the boy put the box and the other gear beside it.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507723032375{margin-bottom: 0px !important;}”]

Great things in business are never done by one person. They’re done by a team of people.
Steve Jobs

[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507727783792{margin-bottom: 17px !important;}”]They sat on the Terrace and many of the fishermen made fun of the old man and he was not angry. Others, of the older fishermen, looked at him and were sad. But they did not show it and they spoke politely about the current and the depths they had drifted their lines at and the steady good weather and of what they had seen.[/vc_column_text][/vc_column][/vc_row]

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[vc_row][vc_column][vc_column_text css=”.vc_custom_1507722769727{margin-bottom: 23px !important;}”]The old man was thin and gaunt with deep wrinkles in the back of his neck. The brown blotches of the benevolent skin cancer the sun brings from its eflection on the tropic sea were on his cheeks. The blotches ran well down the sides of his face and his hands had the deep-creased scars.lines at and the steady good had the deep-creased scars. They sat on the Terrace and many of the fishermen made fun of the old man and he was not angry. Others, of the older fishermen, looked at him and were sad. But they did not show it and they spoke politely about the current and the depths they had drifted theirlines at and the steady good weather and of what they had seen.
The successful fishermen of that day were already in and had butchered their marlin out and carried them laid full length across two planks, with two men staggering at the end of each plank, to the fish house where they waited for the ice truck to carry them to the market in Havana. Those who had caught sharks had taken them to the shark factory on the other side of the cove where they were hoisted on a block and tackle, their livers removed, their fins cut off and their hides skinned out and their flesh cut into strips for salting.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_single_image image=”11660″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154483781{margin-bottom: 30px !important;}”][/vc_column][vc_column width=”1/2″][vc_single_image image=”11661″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154497588{margin-bottom: 30px !important;}”][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”11662″ img_size=”full” style=”vc_box_rounded” css=”.vc_custom_1508154510891{margin-bottom: 25px !important;}”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507722983215{margin-bottom: 15px !important;}”]When the wind was in the east a smell came across the harbour from the shark factory; but today there was only the faint edge of the odour because the wind had backed into the north and then dropped off and it was pleasant and sunny on the Terrace. They walked up the road together to the old man’s shack and went in through its open door. The old man leaned the mast with its wrapped sail against the wall and the boy put the box and the other gear beside it.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507723032375{margin-bottom: 0px !important;}”]

Great things in business are never done by one person. They’re done by a team of people.
Steve Jobs

[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1507727783792{margin-bottom: 17px !important;}”]They sat on the Terrace and many of the fishermen made fun of the old man and he was not angry. Others, of the older fishermen, looked at him and were sad. But they did not show it and they spoke politely about the current and the depths they had drifted their lines at and the steady good weather and of what they had seen.[/vc_column_text][/vc_column][/vc_row]