Many Start-Ups That Generate Supernormal Profits Had Zero Early Revenue — VCs Need To Realise That

Early revenue might seem attractive, but the truth is that many of the world’s most profitable companies did not have any early revenue.

Early Revenue Does Not Signal Anything — Definitely Not Future Profitability

It is a mistake if you think that early revenue is a signal for future profitability.

The truth is, early revenue often does not really signal anything. Whether a start-up or company eventually becomes profitable or not depends a lot on the fundamentals of the problem they are solving, their product and many other factors.

Early revenue does not necessarily signal future profitability.

Google Had Zero Early Revenue — Now They Are Printing Money Out Of Thin Air

Google is an example of a start-up that had zero early revenue, but are not printing money out of thin air every quarter.

10 Billion USD Profit On 38 Billion USD Revenue Every Quarter — Zero Early Revenue

They are generating 10 billion USD in profit on 38 billion USD in revenue every quarter, and this is a start-up that had zero early revenue when they first started.

WeWork & Uber Had Great Early Revenue — But So What?

On the other hand, start-ups like WeWork & Uber had great early revenue, but so what? Their businesses have a heavy physical aspect, costs a lot to scale and have relatively low margins due to the need to pay the middle man.

They are not very profitable businesses, at least for now. In fact, they are losing money on each unit of sale made.

Read Also:

Did Softbank Get It Wrong With Uber And WeWork?

Conventional Businesses Have Great Early Revenue Too — They Are Not Worth Much

If early revenue is a great indicator of future profitability, then any conventional business is a great investment and will generate great future profitability too.

Any cafe or roadside burger stall has great early revenue, but conventional businesses are not worth that much. Even if you manage to build a Starbucks, you are still not going to be as valuable and as profitable as a Facebook or Google.

Stop Getting Attracted To Early Revenue — They Mean Nothing

The reason why conventional businesses, despite having great revenue are not really worth that much is because they are businesses that are not that hard to get into, not as scalable and have relatively low margins compared to a true innovative tech company like Google or Facebook.

Many investors in this region are attracted to tech start-ups that have early revenue, but the truth is that early revenue for a truly tech start-up does not really signal profitability.

Read Also:

Super Profitable Companies Don’t Have To Generate Revenue Early — Most Don’t

The Most Successful Start-Ups Often Had Zero Early Revenue — Understand That

Investors need to understand that the most successful start-ups often had zero revenue and had to first invest in building a truly innovative and disruptive product that could solve a problem thoroughly, be the best at solving the problem than any other solution that is out there today, find product market fit before they can dominate the market and generate supernormal profits once everyone in the world is using their product.

It’s an entirely different ballgame.

Don’t Be Afraid To Invest In Innovative Start-Ups With Zero Early Revenue

That’s why, don’t be afraid of investing in truly innovative start-ups that are building disruptive products that would solve big global problems despite not having any early revenue. You will be missing out on a lot of you make early revenue a requirement.

Read Also:

Here’s Why You Should Invest In Me & Wowwwz

I hope you will help me so that I can build the tools to help everyone in this world find their soulmate whom they can grow old together and live long happy lives with.

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The Next 100 Billion Dollar Start-Up Will Be A Dating App

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