The investing criteria of growth investors determines the balance
Do you expand fast to beat the competition or take the time to dial in your business model? If you move fast, you risk negative unit economics or some other blitzfail. More
In the early days of PayPal, we lost money on every transaction. The product was free, and we lost about 2.5% of the transaction to fraud and credit card fees. More
The economics of tech-enabled businesses look like the businesses they're replacing
The problem with this new generation of tech-enabled businesses is that their economics and business models look similar to the companies they’re replacing. More
Scaling with negative unit economics leaves no profit to optimize
Every startup needs to develop the muscle of attributing costs and calculating unit economics. It’s often under-developed because most founders believe profitability is something they can optimize down the road. More
This leads to a brutal restructuring at massive scale
People are already familiar with core metrics like unit economics. The question is: Why does negative unit economics catch startups by surprise? The answer is that, in a lot of cases, unit economics are hard to measure. More
VCs now compete to see who can be the most pro-founder. They don’t want to tell founders they’re doing something wrong or give them any tough love.
Founders of fast-growing companies get to pick their board members. More