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Comment by Analemma_ | Hacker News Reader

No, because the mania for throwing money at tech startups is specifically because of tech's unique promise of both worldwide scale and zero marginal costs after the initial Big Spend on capex, and hence potentially gigantic returns for investors.

Now, how well the current crop of startups is delivering on that promise is an exercise left to the reader, but it's there in theory. A dry cleaner has marginal costs and no economy of scale, and so can't attract unicorn valuations.

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> tech startups is specifically because of tech's unique promise of both worldwide scale and zero marginal costs

This theory fails to adequately explain WeWork.

I mean, I think you should be right, but in principle I do not see why WeDryClean should not work while WeWork does.

much like wework - all you gotta do is convince 1 person who controls vast sums of money that it will work. I'm very convinced by your WeDryClean idea! (Sadly no vast sums of money, though)

Zero marginal cost in theory. In reality, you often find enormous cloud costs combined with huge marketing spend.

As long as your product is perfectly scalable and generates a profit for money spent that way, it makes perfect sense to take a loan, spend a fortune, make a fortune, then pay off the loan and take in profits. Then turn around and do it again.

It isn't the absolute size of the numbers that matters. It is the ability to rapidly scale the business once you have the right business model and product.

And in particular, if you sell low churn saas (like we do), you can comfortably spend the first year's annual contract value on customer acquisition and have an extremely profitable business. Just huge initial marketing costs.

And quite possibly huge ongoing marketing costs! But if churn is low, or even negative, you can assume something like 10 year customer lifetimes, with a comfortable 5-ish percent cost increase per year, on sale for the first year's contract value. If you have cheap-ish money available, you should buy as many of those as the world is willing to sell.

"As long as your product is perfectly scalable..." I agree. Usually it's not, and more difficult to get there than people think.

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