[xiaolingxiao]

"Investors for software startups are not that great if you want your business to be self-sustaining without becoming a unicorn or a Ponzi scheme. " - can you elaborate on this? Gut check wise this feels correct, but I'd like to hear your thoughts.

[Comevius]

It's nothing new, investors chase valuation over profits, which among others depends on growth because of the benefits of network effect. As a result most invested capital goes into user acquisition, and products become heavily subsidised.

This venture model is good for unicorns like Facebook, who's network effect allows it to be eventually profitable, but the rest of the industry is not profitable. But VCs are, because of their management fees and because they avoid to be the greater fools, otherwise known as the bagholders who end up paying for it. VCs tend to encourage wasteful spending in the name of valuation on salaries, rents and user acquisition. It's a Ponzi-scheme where the bagholders tend to be limited partners and employees of the funded companies.