[downandout]

>This includes Twitch, which Amazon bought for ~970MM plus an earn-out.

These kinds of companies with massive bandwidth costs rarely become profitable, and even if Twitch bucks the trend, Amazon could easily use Hollywood accounting to avoid any payments on the earn-out (for example, it could charge Twitch retail rates for use of AWS services). It strikes me as a bad decision to accept an earn-out when the overwhelming likelihood is that the clause will result in exactly $0 going to the former owners.

Re: stats, 40 out of 940 are worth more than $100M. Dozens more are probably worth at least $25M. That is an insanely high success rate. The YC system works!

[patio11]

That particular example aside, useful information for many HNers: Earn outs in tech are routinely earned out. They're negotiated with the assistance of very smart, very highly paid specialists, too.

A fairly common outcome (anecdata from friends) is that the earnout is virtually in the bag at the 50% point and after that they are mildly frustrated with thumb-twiddling while waiting for the clock.

[loumf]

From my anecdata, the acquiring company is using the earn-out as more of a test that what you are saying at acquisition time is true. It augments due-diligence.

Meaning, if you are right about the business, these milestones are trivial to hit. If you don't accept the earn-out, it's a signal that something you are saying is either wrong or being misinterpreted.

[qq66]

YouTube has massive bandwidth costs, and it became profitable. Bandwidth keeps getting cheaper, user attention maintains its value or gets more valuable over time.

[downandout]

Which is why I said most companies with large bandwidth costs do not become profitable. YouTube eventually is one notable, glaring exception. But even they took years, billions of dollars in infrastructure investment and losses on bandwidth, access to a massive existing base of advertisers that already trusted its parent company, and arguably the best monetization team in the history of capitalism to achieve profitability.

[qq66]

Netflix and maybe Hulu are also profitable, but they are paid services which is a different beast. No reason that Twitch couldn't have paid/free tiers like Hulu someday though.