Why Profitability Matters
The industry loves to focus on the extremes — the unicorns, the implosions — and we make celebrities out of the biggest winners and losers. We applaud startups that raise massive amounts of money at huge valuations, but the simple math is that most don’t survive, and with every raise comes increased risk and higher exit requirements. We celebrate VCs who find the unicorns, but the simple math of venture is that they plan on most of their companies failing. And the few that don’t fail, rarely reach profitability.
Well, I’m proud to announce that Bitly is now one of those rarities, having recently reached profitability.
We worked very hard as a team to get there. It was one of our goals. We doubled our expenses a year and a half ago and executed our plan to reach this milestone, believing that we could deliver real value to marketers. And we did, through a series of ups and downs, but mostly ups. ☺
Why profitability? It’s a good question. For us, it was important for us to be in control of our destiny. When you’re burning cash, you’re at the mercy of others and more likely, the volatility of the funding marketplace. So many companies are going all-in on competitive spaces where there won’t be multiple winners — the venture portfolio model is built on this. There seems to be no shortage of ideas and dollars chasing them.
But with this comes with deeper issues. For the employees who work at those companies and their customers, the risk of failure is very real. Many believe that there is a crash coming. If a crash does come, the ones that will withstand the crash are those that have removed dependence on the cycle of burning cash and taking cash. The ones that will remain standing are those that are profitable, or at the very least, near it. Just look back at the last two crashes. Ideas, capital and jobs got washed away.
This isn’t to say we won’t invest in growth, we’ve doubled our business each year by doing just that. Now that we have a company that can both survive and thrive on our own, we may indeed dip below profitability again. But we will be doing so on our terms, with profitability in mind.
Now, I’m not saying that building a high growth, high cash burn company can’t be valuable nor the right strategy. Obviously it can be. But, we have an outlier bias that causes us to miss a lot. If you’re lucky enough to have great investors, like we do at Bitly, they will push you to build a long-term sustainable business on as little capital as you need; not a penny more. That’s an incredibly meaningful achievement; one I believe will drive the greatest returns, both financially and otherwise, for everyone involved.
Originally published at www.linkedin.com on March 19, 2015.