How About a Startup that Just Makes Money?

Here's a crazy idea — what about a startup that just makes money?

I know, I know — crazy talk! But it turns out that while 1% of the startup world is busy chasing venture capital and trying to create outsized returns, 99% of the rest of businesses are just trying to build a business that consistently turns a profit.

"How dare you question the wisdom of VC!" — echoes the startup world.

But seriously, it turns out even grizzled veterans of the startup world, especially those who have raised venture capital before, are getting really excited about building companies that guarantee a profit versus potentially generating an exit.

What Happened?

It's a confluence of factors, really. When the Nuclear Winter of Funding hit in 2022 and beyond, an awful lot of funded companies got wiped out, and those that survived struggled hard. It was a painful lesson to everyone, and a recent one, that while the promise of big outcomes sounds amazing, and those big checks look pretty, the reality for everyone (even investors) can look very ugly.

That left a very large swathe of investors, Founders, and all the people who worked for them a little bit salty about the idea of risking everything now for a return later. More importantly, it took almost a decade of work for everyone involved and set it on fire.

Every single person involved lost up to a decade of their life, which means we all had to take a hard look at how badly we wanted to risk another decade to do it again. All of a sudden, spending that time on something that would generate a more reliable outcome got sexy.

Profit Scales

Unlike our big exits, a profitable business is valuable at nearly all levels of scale. Whether the business is generating $100k in profit or $100m in profit, we actually get paid. That's not so much the way when it comes to funded startups, where it tends to be "all or nothing," with an emphasis on "nothing."

Personally, I've done both — venture-funded and profitable, bootstrapped companies, and I've tended to find that the profitable ones never look sexy at first. but over time that profit not only scales, it compounds, because we're actually putting money in our bank accounts year over year. We've been bootstrapped and profitable for 10+ years at Startups.com and I can tell you — it adds up.

Let's say our startup idea never turns into a "big outcome" by VC standards, or even our own. At least we have something to show for it. Maybe we create something we thought was going to be a massive success but it only ends up generating $50k per year in profit. It's not earth-shattering by any means, but it's $50,000 more than zero.

Tired of "The Game"

Aside from the economics, I think we're now seeing a generation or two of Founders who are just tired of the whole "money raising game," whereby instead of focusing on the fundamentals of making money, we're focused on trends and the whims of investors. We're focused on "what will look good in a fundraise" versus "what will make us more money."

We're tired of building something for other people instead of building something for ourselves. We're tired of chasing the validation that inherently comes with having to woo investors and cater to their needs. We just want to go back to focusing on our product, team, and customers and turn that into something that turns a profit.

The irony is that this renewed focus on "just building a profitable company" is likely what will become the fabric of a new generation of more healthy companies, which in turn, will likely be more investable anyhow. It's funny how that comes full circle.

Don’t miss out on free credits from Google Cloud for Startups! It’s your chance to leverage powerful cloud solutions without the initial cost. Click here to get started and propel your startup forward.

In Case You Missed It

Should We Focus on Profit or Growth? Just because we're a startup doesn't mean we are entitled to profit or growth — so what do we focus on when we really want both?

How to Create a Founders Agreement for Your Startup What is a founders agreement — and do you need one? (Spoiler alert: You do.) Here's everything you need to know.

The Value of Many Tiny Financial Wins (podcast) The mentality of all your daily sacrifices, struggles, and losses eventually leading to getting rich is wishful thinking (sometimes). Why not work on achieving small but steady financial wins, instead of staying broke for years in the hopes of getting rich all at once?