Many say start-ups don’t need to make profit immediately if they are able to grow rapidly, and refer to Amazon and Facebook as prime examples.
Of course, this may be true in some cases.
However, this kind of growth-centered, upfront investment works only in industries that can monopolize the market and heighten their entry barriers through a ‘virtuous cycle’.
This cycle is created in commerce industries and platforms where massive investments create a scale of economy that leads to price decrease and more visits from consumers, which in turn, gathers sellers.
Unfortunately, most start-ups have a business model that cannot harness the benefit of this virtuous cycle. In order to do so, the following prerequisites should be met first:
- Customer value should be higher than the minimum variable cost.
- There should be an entry barrier when a massive fixed investment has been made.
- Have strong plans to outperform fixed costs once the company enters the growth stage.
Only then will the start-ups be able to (1) procure capital from external investment, (2) increase sales, and (3) make profit surplus.
So, let’s see how Dable went!
1. Procure external investment
Dable strategically sought for Strategic Investors (SI) who could directly help its business.
As a result, during the three rounds of investments — SEED, Series-A and Series-B — Dable was able to earn 8.2 billion won of investment.
“Dable has become the no. 1 personalization content and ad recommendation platform in Korea within one year from its launch. I focused on the teams’ highest level of competence, visions, and prospects on overseas expansion and decided to invest in Dable. I am looking forward to its success,” said Jisung Oh, Team Lead of Stonebridge Capital.
Kijoon Kim, a partner at Kakao Ventures (formerly K Cube Ventures) who decided on a follow-on investment, said “Search technology that shows the users what they were searching for and recommendation technology that provides the users with content they might like are solutions that satisfy both customers and clients in a world flooded with information. Dable proved its ability to execute by getting on track within one year from its launch and earning positive feedback from the market. That’s why I decided to make a follow-on investment.”
With most of the investors making follow-on investments, Dable could prove its sincerity to the world once again.
2. Grow sales
In the most crucial moments, Dable successfully procured three rounds of investments.
Thanks to that, Dable has continuously grown by hiring quality employees and improving its service.
There were heated competitions with global counterparts and various copycats, but Dable survived them all and is showing continuous growth.
3. Achieve profit surplus
Most of the start-ups go through a journey called ‘Death Valley,’ where they need to survive from fixed investment losses and accumulate profit surplus.
“Turning surplus? Yes, we made it happen”
Procuring investment is just a stepping stone for success. The problem is whether you can effectively ‘use’ that stepping stone.
In 2017, Dable successfully turned its profit to surplus within three years from its launch, turning its possibility of growth to reality.
By ending the journey of Death Valley (investment → growth → profit surplus) in three years, Dable has proved itself as a company that can continuously develop with its own service and business.
But, this is not the end.
To be recognized as ‘a company that always tries new things’, Dable is working on a new initiative in 2019. And Dable is open to anyone who’s willing to share our vision and goals, with a collaborative mind aimed towards growth.