[tornato7]

Here's a thought experiment about a theoretical company that can obtain incredible valuation.

You start out with some money from friends and family, and you use this money to sell $100 bills for $50. Lots of takers.

Soon enough, you go to a VC and show them your revenue stream, and tell them with more capital you can make the margins much better. They hand you a few million, and you start selling more $100 bills for $70 instead. Wow, you're reducing margins and seeing insane sales growth!

A few more investments later and you're selling $100 bills for $95 en masse. You have ads everywhere, your IPO and ICO are coming up. You probably have a few billion in funding from SoftBank.

Your stock price skyrockets because you're THIS CLOSE to showing profitability and if the trend continues you'll be making billions.

[vasco]

You're obviously mocking this whole thing but the fact is that if you can get away with it, you can use that valuation to acquire actual smaller companies and talent and if you're running an online business and acquire a lot of customers (even if selling $100 bills for $95) you'll have huge distribution that you can then sell whatever you come up with next.

Or as they use to say, we lose money on each unit but we'll make it up in volume.

[sequoia]

> Or as they use to say, we lose money on each unit but we'll make it up in volume.

I believe this is a joke, no? I.e. you can't lose money on each unit and "make it up in volume."

[lotsofpulp]

It's a joke, because the strategy is to undercut or buyout the competition to survive long enough to be the last one standing.

[NoOneNew]

Dude, that's a ponzi scheme with a few extra steps...

...

Ah shit...

Jokes aside, this is also why there are so many "haters" for such companies. A lot are the ones pointing this out since it's clear as day. But hey, people like their high horse. They trade out your classical deity religions for mortal idol cults and act enlightened. Its creepy how tech these days are just cults.

[ludocode]

This article from two years ago describes the "75 cent dollar store" as an analogy for MoviePass which is basically the same idea:

https://www.nytimes.com/2018/05/16/technology/moviepass-econ...

[simonsarris]

This is more or less how PayPal started, yeah.

(When they sold the $100 for $80 they also onboarded them to do other things, once there were enough of them. Eventually they reduced the payout to selling $100 for $95.)