Many high flyers are flying straight into a banner with the words of the headline above written on it. It's not totally dumb for a startup to try to burn through a pile of cash and create a new market that it will turn into a future cash cow. It takes though, a lot of vision to achieve, and, of course, very patient investors.
Jet.com is the highest of these flyers, it is trying to take "some" of Amazon's business by spending it's way to growth in a span of a few years. As crazy as it sounds, these guys have vision. I must say. But there is a difference between vision and desperation, and the smaller "wanna be' flyers that I am seeing are more of the latter.
Selling stuff so cheap that a company shifts it's losses to it's investors is just the tip of the "losses for growth startup" icebergs we've been sailing through lately. Now startups give away money to users to have them sign up. You read that correct. You sign up with them, you get paid!
Not to pass any naive judgments here, many believe this is now the secret to building big startups fast, by losing money very fast in order to have growth. Uber, Airbnb, and many more are all doing this. My gut tells me this is not the right way, the Facebooks and the Googles where not built this way.
The main reason for this is probably the cheap money that is about to dry up in the coming months as credit is tightened with the coming rising interest rates. Then the market will get a reality check and we'll see if this strategy has worked or if it will backfire and then we'll see the ones saying - "We just wanted to build the market, so we burned through our money,"
Jet.com is the highest of these flyers, it is trying to take "some" of Amazon's business by spending it's way to growth in a span of a few years. As crazy as it sounds, these guys have vision. I must say. But there is a difference between vision and desperation, and the smaller "wanna be' flyers that I am seeing are more of the latter.
Selling stuff so cheap that a company shifts it's losses to it's investors is just the tip of the "losses for growth startup" icebergs we've been sailing through lately. Now startups give away money to users to have them sign up. You read that correct. You sign up with them, you get paid!
Not to pass any naive judgments here, many believe this is now the secret to building big startups fast, by losing money very fast in order to have growth. Uber, Airbnb, and many more are all doing this. My gut tells me this is not the right way, the Facebooks and the Googles where not built this way.
The main reason for this is probably the cheap money that is about to dry up in the coming months as credit is tightened with the coming rising interest rates. Then the market will get a reality check and we'll see if this strategy has worked or if it will backfire and then we'll see the ones saying - "We just wanted to build the market, so we burned through our money,"
