Original take found on another forum.

"I think we’re seeing the beginning of the tech bubble bursting again.

You’ve got the successful companies that provide a case study in tech industry profitability(Google, Amazon, Apple, etc.) which is why you’ve got all these venture capital firms plowing so much money into startups, left and right, because they expect that one of them will be the next Google or Amazon. Now that low interest rates have gone bye-bye, the VC firms are demanding that these startups start showing a profit. However, almost all of these startups have one of the following problems:

1.) They were never profitable and can never be profitable because the fundamental concept of what they do is thoroughly flawed
2.) The service or good they provide could be profitable, but due to being formed during a time of easy money, their current business model is incapable of being profitable, and they are too over leveraged to be able to restructure themselves into a more profitable setup
3.) They are perfectly sustainable/profitable, but their financiers expect far more return on investment than they are capable of providing

The result is the trend of “enshittification” as VC investors force unwanted changes onto these startups in the hopes of increasing revenue. This is stuff like locking previously free features behind a paywall, clogging everything with ads, cutting costs somewhere (payrolls, server space, etc) that negatively affects the user experience, raising prices, or needlessly bolting on something that nobody asked for because it’s one of the only things that VC firms might still blindly throwing money at(AI).

Even the actually profitable companies are doing this shit because they are just addicted to the ridiculous growth they’ve enjoyed in the past."

  • Anomander@kbin.social
    6·
    1 year ago

    Profitable, from a VC stance, is a company that generates more money than it must spend on its operating expenses.

    If they are reinvesting revenue is that profitable or not? You seem to think not but why not?

    Yes. What you’re choosing to do with your profit is a separate question, but you have generated funds above and beyond operating expenses that can be reinvested.

    Depending on the scale and focus on the business, in some cases, some R&D or growth investment is necessary as part of “operating expenses” while in others it isn’t.

    If they were instead just giving dividends to shareholders, or amassing cash, would that be more profitable?

    In this case profitable is “yes” or “no” - not a sliding scale of greys. If they are able to make dividends or stockpile cash, they are also profitable.