If It Doesn’t Make Dollars, It Doesn’t Make Sense

Maybe I’m getting old and traditional. Maybe it’s the scar tissue from barely surviving the Dotcom boom in the late 90s and the consequent bust in 2000 and 2001 where the entire tech startup ecosystem almost disappeared. It was brutal and the metaphor commonly used during that time was nuclear winter. I don’t care how bad things get now, I don’t think it will ever be that bad in the tech industry again. 

So many smarter, talented and more experienced people than me left in 2001 and 2002 and missed the consequent massive boom in tech that happened over the proceeding two decades. Like all Gold Rush towns, we have new eager people coming in without the scar tissue but also without the collective memory. Silicon Valley thrives by drinking the blood of the new, young and naive. This is innovation, new blood brings in a new perspective, a new view and a lot of energy. 

But with the new influx of people something gets lost along the way: hard lessons gained from massive pain. I’ve never understood businesses that don’t have working business models. I’ve never understood why companies scaled bad unit economics or bad retention numbers. It’s okay to lose money in the beginning. I’m not an investment banker or an east coast or European VC where their conservatism requires growth metrics and traction that make no sense for early stage startup investing. Any idiot can invest in traction. 

But the business model ultimately needs to work and scale. That plus It has to solve a real problem that people are willing to pay for. That is why I’ve been such a huge skeptic on most food delivery like Gorillas and micro-mobility businesses like Bird and other such garbage. 

And in 2022 and 2023, everyone, whether Limited Partners in VC funds, VC Investors and startup founders are learning this lesson the hard way. Money covers up a lot of issues but cycles always turn eventually. Reality really does bite sometimes. 

At the end of the day, as my old friend Scott once told me: “If it doesn’t make money, it doesn’t make sense.” Think about that. There are plenty of lessons to learn from business history.