Even though I work in high tech, I don’t really understand business that loose money during their entire existence. How can that be a business? I invest in a restaurant that is luckily profitable after 1 year. We offer a product people value and are willing to pay for. We have investors who want to see a return on their money in a few years and not wait for a IPO or buyout opportunity that may or may not come.
I understand that initially a company have to heavily invest in order to build up the customer base, but after 3-4 years, isn’t it time to put a stake in the ground that you have to figure out a way to be profitable? Or you need to think about whether you are a business or just a gamble that someone will bail you out?
If you are loosing money after 4 years, it’s time to evaluate
1) Am I hiring too many people, expending too much capital compared with the revenue I’m bringing in?
2) Is the product even worth paying for? Is my product/ services really valued by customers?
3) Is my company really going to get the economy of scale or will the cost of doing business going to overtake any savings I will gain?
4) Is the barrier to entry for my competitors strong enough to keep them away long enough in order for my growth to continue?
I don’t believe in technology companies that do not have a 4 year horizon to profitability. They are just kidding themselves and not asking the hard questions and making the hard decisions.