Twilio went from $33m to $59 Q1 '15 to Q1 '16. That's huge growth - and is a lot to like.
Virtually every company that is growing at 80% YoY runs unprofitably.
Here's why: compounding. They're growing 80% YoY because of that spend and it's absolutely worth it.
Say they could run break even at 50% YoY growth. Straight line that growth through 2019 and you have a company doing just shy of $800m in annual revenue. Invest $40m extra a year for 80% growth (admittedly very simplified!), and you have a company doing $1.4B per year.
Growth costs money up front: it's marketing, it's customer acquisition, it's hiring and scaling so you're ready to do nearly double the volume next year and it's opening new lines of business.
You'd be nuts not to spend some extra cash when a) unit economics are good and b) you can turn it into significantly more cash in 12-24 months.
Twilio could run profitably tomorrow at the cost of hundreds of millions in revenue and potential profit 3, 4 and 5 years out.
Disclaimer: Jeff Lawson is a CEO I greatly admire.
There was a great article that gets posted here often about how it's ok to be unprofitable if you have high growth, and it's ok to have low growth if you have high profits. Anyone have a link?
Virtually every company that is growing at 80% YoY runs unprofitably.
Here's why: compounding. They're growing 80% YoY because of that spend and it's absolutely worth it.
Say they could run break even at 50% YoY growth. Straight line that growth through 2019 and you have a company doing just shy of $800m in annual revenue. Invest $40m extra a year for 80% growth (admittedly very simplified!), and you have a company doing $1.4B per year.
Growth costs money up front: it's marketing, it's customer acquisition, it's hiring and scaling so you're ready to do nearly double the volume next year and it's opening new lines of business.
You'd be nuts not to spend some extra cash when a) unit economics are good and b) you can turn it into significantly more cash in 12-24 months.
Twilio could run profitably tomorrow at the cost of hundreds of millions in revenue and potential profit 3, 4 and 5 years out.
Disclaimer: Jeff Lawson is a CEO I greatly admire.