What we have found here in the UK, is without profitability, raising an A-round is near enough impossible. The UK Start-up/Inventment scene is still very much in it's infancy and investors are reluctant to give sums anywhere near the figure Ryan has quoted without a 'profitable' business. Well done to the team for creating a fantastic service all whilst spending time with family, highly commendable!

I'm obviously being facetious and while I don't want to be "that guy" dismissing what appears to be a very respectable business, mentioning revenue & customer numbers without mentioning profit values or percentages irks me.

This is probably because of 8 seasons of Dragon's Den and 3 seasons of Shark Tank that have impressed upon me just how few people understand that a large turnover means nothing; "turnover is vanity; profit is sanity". It's not easy to achieve a large turnover, sure, but it's also meaningless unless it is associated with a reasonable net profit.

Having read through a few more comments I suspect the author's business is probably turning a decent net profit, but, nevertheless, the post seems incomplete without this data or at least some form of confirmation (e.g. "our net profit is between 10-20%").

EDIT: On HackerNews, a place for entrepreneurs and consequently the presumably financially literate, I'm being downvoted for pointing out that terms are missing from the profit & loss equation being presented, with nobody stepping up to explain why there's something wrong with my criticism?

EDIT: it only takes one or two people out of all HN users to make it look like everyone's against you, so I try not to take DVs to heart.

I think it's great to be excited at the potential for success, and the reason I come to HN is because it is invigorating and motivating to see the success of others, and to learn from their experiences.

However we must not forget that the vast majority of small businesses fail. In the best case, that's the entrepreneur's money and time expended; hopefully on the upside some lessons were learned and the financial hit is not too bad. In the worst case, it can be the life savings of investors that may be family and friends, as well as relationships, that are lost; furthermore, bankruptcy is a distinct possibility. So, my feeling is this is extremely serious stuff that requires direct, hard-hitting commentary - not a softened message that's potentially easily dismissed.

Business is combative - it's always competitive. If people are quick to ignore the realities of the most basic details of business (the profit & loss equation), and take offence when that criticism is presented, does that not seem a bit of a concern? Would you invest in somebody like that?

Profitability is more important.

There are examples to the contrary (Tumblr, Pinterest, Instagram, etc) but if you're profitable this means you are providing a worthy service (unless you're in the 'Nigerian Prince' business), and people are willing to pay you!

Never underestimate the power of people actually paying you.

As for the age-old debate of profitability vs fundraising, it's not a black and white issue. And I don't know why people so often feel the need to try and turn it into one.

Profitability is great. You're right -- it's a signal that you're providing a valuable service. But as you pointed out, there are many examples to the contrary, and rightly-so: because achieving profitability is not the only way to build a valuable business. And even for companies who do focus on charging customers rather than, say, getting tons of users, raising money is often an important step on the path to eventual success.

It is not possible to build a valuable business without achieving profitability. Over a long-enough time period, the value of a non-profitable business will revert to zero.

If a business is valuable, it is because the market (or investors) believe either

a.) It is going to make profits at some point in the future. b.) It is going to be an attractive acquisition for another company (who are presumably only going to buy it if they believe it will enhance their long term profitability).

Of course there is c.) , which is when investors buy into something because they believe someone else will come and buy it off them in the future for a greater amount of money. If we've reached this point, it is a sure sign of a bubble (cf Tulip fever in the Netherlands).

It really isn't.

Some of us invest in things because we expect that in the long run the pay-off will be greater than the investment. In business terms, that means that the cost of buying into a company is less than the profit you are expecting to realise through dividends over the long run.

The idea (modern trend?) of having companies that pay no dividends, whose shares are valuable only because someone else might buy them for more money later, seems to me to be exactly what tomgallard said: a sure sign of a bubble.

I've often wondered why we allow companies, particularly publicly traded ones, to sit on an ever-growing war chest rather than paying out their profits to investors as dividends. I don't know enough grown-up economics to appreciate the realistic consequences of regulating that kind of behaviour, but the zero-dividend, war-chest approach seems to promote all the wrong behaviours in terms of markets and investors, assuming your goal is to have a healthy economy that promotes making useful products and providing useful services.

Because we believe that a large, successful company has investment options available to it that are not available to Joe Average, and can achieve a better return on that capital for its investors than they would be able to achieve themselves if it were returned immediately as a dividend. If you disagree with that analysis, you can easily vote with your investment dollars.

What I'm asking is whether we should allow them to exercise those options. Doing so, as you hinted in your own comment, means that large companies have to become skilled investors, and this will inevitably become a significant or even the dominant part of their existence instead of actually making useful things or providing useful services.

As we've observed all too recently, not all of those extra investment options are quite as effective as they were supposed to be. Moreover, any investment option that is legitimate could probably offered to (now richer) individual investors if large companies were not allowed to use it. So I'm not sure where the big downside is of restoring the natural links between companies that do socially useful things like make good products, companies that make profits, and companies that are attractive to outside investors when they need extra funding to grow faster.

Alternatively, if these companies are going to be allowed to invest their profits on behalf of their own shareholders, perhaps it's about time they were regulated as financial institutions. If nothing else, shareholders should be protected from senior management who are erroneously convinced that they can do a better job gambling^Winvesting their shareholders' profits than the shareholders themselves can do of choosing where to spend a legitimate return on their investment.

Large companies carrying trading/gambling departments not related to the rest of their business is, as you say, probably not a good thing.

If it's no dividend, then the stock is only valuable as a flip-asset. If it's got any dividend at all, then the stock has real value as an income stream.

Funding is great, but the above sounds like a better measure of success to me.

Is 'the Bank just lent us $ million' as impressive as 'we reached profitability?

It certainly shouldn't be.

Tech press looks at funding and the stable of investors as validation that a company is worth covering. "How much money have you taken?" and "Who are your investors?" seem to rank above covering how the tech works or if it's unique, both for journalists and for prospective acquirers.