>Entrepreneurs in Y Combinator may be taking a cue from the program’s co-founder, Paul Graham, who in June penned an open letter urging young startups to focus on making money as a hedge against a potential downturn in Silicon Valley [...]
What a crazy idea! Companies should try to make money!
I'm not sure if you're misunderstanding this intentionally or unintentionally, but the issue here is not whether companies should make money, but when. There are plenty of valid strategies that defer profitability. Paypal for example spent tens of millions of dollars before they reached breakeven, and if they hadn't, all other things being equal, they would have lost to a competitor who did.
I wasn't intentionally trying to mischaracterize your statement, apologies if it seemed that way. My remark was too flippant and should have been backed up with some reasoning.
I understand that in some cases (financial, healthcare, biotech, etc) there are heavy capital requirements, simply because of the area they operate in. There are also other cases where using a large pile of cash can push you ahead of the competition and secure the entire market.
But if I had to guess, I'd wager that many, many startups are not in this kind of situation. They aren't in a capital-heavy field, and burning down a big pile of cash isn't going to make them the industry leader and crush the competition. I think more startups could be served better by simply focusing on solid business fundamentals...and it amazes me that just now are startups realizing that. Hence my comment.
That said, I'm arm-chair quarterbacking here. So my opinion counts for about nothing :)
Edit: For what it's worth, I agreed with the article and was pleased with the "be profitable sooner" mentality that the current YC batch has.
It's not just capital-intensive industries. Winner-take-all markets will be won by a company that focuses on expansion first, revenue second.
Not all industries are like that. Social networks and payment networks, though, are examples of winner take all markets. That is why it makes sense to raise a lot of money and try to capture the dominant spot in the market before a competitor does so.
>There are plenty of valid strategies that defer profitability.
You can't point to the exception, the case that just happen to work out, and consider it a valid approach.
The time to make money is always now. Any other approach is just deferring the inevitable confrontation of whether the company/idea/execution is economically viable.
What a crazy idea! Companies should try to make money!