Startups: Reliance on fundings as a barrier to entry against competitors.

I think well funded startups are after perceived barrier to entry now.

If you lose more money per year, it means there is a higher barrier to entry to your business, as others need to have deeper pockets in order to compete.

In the eyes of investors, that’s actually good.

If you are making 5 to 10mil a year without any funding, it means you have found a really lucrative gold mine that invites competition, so you are a bad vehicle for investment.

If you open a bar, and 1,000 people bought your drinks and you earn $10,000, you are not investable.

However, if you open a bar, and 100,000 people walk into your bar and walk out without buying anything, you lost $50,000, you are investable because there’s barrier to entry against competitors (others would need to be able to throw away $50,000 with no promise of profitability to fight with you) and you are have “scale”.

 


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