Hacker News Reader

> The real question is who invested, and why?

This always baffles me the most. Who gives money to a startup without a business model? I guess they just have funds to throw at the wall and hope something sticks.

View on HN

Startups with scalable, repeatable business models are basically not startups anymore, since the whole point of a startup is to search for scalable, repeatable business model. And valuations match that: once the startup has actually found a scalable business model and is in its growth phase, expect to pay $100M or more for it, sometimes into the billions.

People aren't necessarily asking for a business. They're asking for a business model: a way, maybe untested, maybe lightly tested, that you might earn more than you spend. Just needs to be semi-plausible, doesn't need to be bulletproof.

It is not clear at all from the article that they never had a business model. Most likely they had to scratch their original plan at one point.

If you don't care about whether it's tested this startup had a plausible business model: by coming up with an algorithm to identify fashion taste, fashion e-commerce sites could show more relevant recommendations, which leads to more sales, which leads to more revenue. Then they pay this company some fraction of that additional revenue, and both win.

That's why bubbles pop I guess.

Reply on news.ycombinator.com