Literally every single company in the top 6 of the S&P 500 was financed via private VC-style funding at the beginning.
Whether the numbers crept into the billions when the company was private or public is irrelevant. The point is that for a company to reach scale, they need billions in funding from somewhere.
Somebody has to take the risk, and all investors want returns for that risk. Public market growth investors want rapidly growing companies just as VC investors do.
None of the top six companies were funded by billions of dollars that were lit on fire like today’s companies.
The early companies like Apple and Microsoft were started with a few million not even a billion in today’s dollars. As I said earlier, Microsoft didn’t even need the later rounds of funding and wanted to bring expertise on board.
The only one of the current top tech companies that weren’t GAAP profitable at IPO is Amazon and even it used its own operating cash to fund growth.
One would assume that there are different styles of VC-style funding, with different time horizons. My original point isn't disputing the need for the existence of VCs in some funding cases- I'm not DHH arguing that every startup needs to bootstrap- my point is that this cycle has shown that VCs pumping in dumb money while chasing unrealistic fast returns has led to self-fulfilling failures, and a toxic culture that promotes that. The original statement:
> do you want to grow slowly and steadily over a 20+ year period only to find that the economics don't work, or do you want to fail fast with some extra waste in the middle
Seems highly dubious because you can take a perfectly fine business model and create an unattainable, doomed-to-fail situation out of it by subjecting it to unrealistic expectations, as we have seen in dozens of examples from the current bubble. Stress testing is not useful if it sets artificial pressures that destroys the business.
Are we talking about investment strategy or cherry picking data for the sake of arguing?
1. There are plenty of companies on the path to IPO that didn't take 1B+ in VC money
2. The "sharing" platforms are expensive investments because there are so many players fighting for market share.
We're talking about a strategy of fast growth vs slow and steady. All the companies we've mentioned so far invested in fast growth early on, whether from VC or reinvestment.
I’m not cherry picking data. Look at the top profitable tech companies today and compare the amount of money invested in them before they became profitable to the Uber and Lyft’s of today.
Amazon is the outlier when it comes to the lack of GAAP profitability for years, but even it was cash flow positive.
That's a false dichotomy. We're also talking about rates of fast growth vs. unrealistic hyper-growth. I'd argue that as the current tech bubble inflates, we've leaned towards the latter. [0]
Let's leave it at this then: if capital is completely miss-allocated and a bubble has been inflating over the last 5-10 years as you claim, then we'll hear the proverbial pop in the next three to six months as a rapid pullback in consumer spending unwinds nearly all VC backed growth stage companies.
Congrats, we're already in the early stages of the pop. But I'm also not claiming that capital is completely misallocated, that's another all-or-nothing false dichotomy on your part. I'm saying that the current VC climate has been dominated by a toxic culture of chasing hyper-growth in many inappropriate cases, killing companies that otherwise have fine business models by subjecting them to stressful expectations. You can take a strategy that works in some cases and apply it in a wasteful, unrealistic way. That is called a cargo cult. Even before this virus crisis we saw earlier this year and last year companies in the SoftBank portfolio experiencing layoffs in the fallout of WeWork's demise. Onwards, not "nearly all VC backed growth stage companies" will be unwound, but the ones funded under the most reckless of terms will be in grave risk. If you haven't seen the bubble popping, you haven't been paying attention.
Whether the numbers crept into the billions when the company was private or public is irrelevant. The point is that for a company to reach scale, they need billions in funding from somewhere.
Somebody has to take the risk, and all investors want returns for that risk. Public market growth investors want rapidly growing companies just as VC investors do.