The Evolution of Startup Metrics: From Users to Profits

Startup founder contemplating a modern city from a tall building

Startup Growth: The Early Days

Once upon a time, in the startup world, having a growing user base was seen as the ultimate metric of success for startup growth. "Build it, and they will come," we told ourselves, focusing on user acquisition with the faith that monetization strategies would naturally follow. This model, particularly prevalent in B2C startups, was driven by the belief that if you could attract users, figuring out how to make money from them could be deferred.

Suggesting early concerns about monetization, such as charging customers or incorporating advertising, was often met with disdain. You were either not playing "the game" correctly or simply didn't grasp the intricacies of startup growth "The Silicon Valley way".

Discovering Revenue

However, this game was sustainable only because investors were willing to fuel startup growth without immediate returns. Then, a significant shift happened: we discovered the allure of revenue.

Suddenly, generating income became a new beacon for success in the startup ecosystem. Yet, the obsession remained with top-line growth. Revenue was king, and profitability was a concept relegated to those unfamiliar with the fast-paced world of startup growth. Why would you sacrifice growth for profitability when there were investors ready to fuel your growth engine?

For a long time, anyone daring to mention profit in startup circles might as well have been speaking a foreign language or coming from another planet (planet Corporate?!).

The goal was growth at all costs, fueled by investment capital, even if it meant burning cash with no clear path to profitability. Success was measured in user numbers and revenue growth, not the bottom line.

The Shift to Profitability

Welcome to now. There's a new realization within the startup community:

revenue alone isn't enough for sustainable startup growth.

The narrative is evolving to embrace profitability. It's no longer just about showing potential or growing at breakneck speed. The startup ecosystem is recognizing that turning a profit is not just possible but desirable. Profits are becoming a badge of honor, signaling that a company is not just viable but also responsible and sustainable in the long term.

Rethinking the Role of Investors

This shift represents a fundamental reevaluation of the startup growth model. It questions the role of investors and challenges the notion that endless rounds of funding are the only path to success. Perhaps we're entering the last stage of startup evolution, where the focus returns to building businesses that are not just innovative and growth-oriented but also financially self-sustaining.

As we navigate this new landscape, "It's the Strategy" is here to guide you through. We're at a pivotal moment where understanding the balance between growth, revenue, and profits is more crucial than ever for startup success. Maybe it's time we rethink the necessity of investors and how we define success in the startup world.

Perhaps it would be more beneficial if investors would allocate their capital towards deep tech, where high upfront costs for R&D are a necessity, rather than investing in yet another project management tool or a new, fancy and oh-so-intuitive method of recording ideas.

I don't know what the future holds and where this "correction" will lead us, but it looks like a healthy move for the system and the world overall.

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