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Comment by Apocryphon | Hacker News Reader

And how much money has been squandered funding the startups that do fail? Survivor bias.

I'm not sure what you're getting at. Here are the facts: Companies following these accelerated growth trajectories now make up a total of 4 trillion in market capitalization depending on how you count it. That's really just the FAANGs, not the smaller companies that are profitable or on the road to profitability [1]. If you count everything you can safely say the number is closer to 8 trillion.

Every year, VC in the US _as a whole_ invests roughly 100B [2]. If you cut out non-growth and non-tech sectors I'd guess that number total goes to around 40B, and roughly 100B (very rough number) globally.

So yeah, some money gets "wasted" but it creates huge market capitalizations that are around two full orders of magnitude larger than a single years investment, and growing strong year over year.

[1] https://www.investopedia.com/terms/f/faang-stocks.asp [2] https://www.prnewswire.com/news-releases/us-venture-capital-...

Facebook - didn’t raise billions and was profitable when it IPOd

Amazon - operates on thin to non existent profits for years but use much of its own money to grow through operating cash.

Apple - definitely didn’t raise billions in the 70s and was profitable at IPO.

Netflix - I don’t know much about Netflix.

Google - grew fast but it also had a profitable business.

Microsoft - famously, MS didn’t even need the VC money it got early on. It took the money because it wanted the expertise of the investors.

Netflix started in the original dot-com bubble as a DVD rental service, and only began streaming in 2007, a decade after they were founded. Reed Hastings put up $2.5 million himself. Not exactly a case of rapid illusory hypergrowth like the poster children unicorns of the current gig/sharing economy dot-com bubble.

None of these companies had to deal with the current investment environment. It's an arms race. While it's a chicken and the egg issue since both Facebook and Google provide virality and discovery, respectively, and it is those two features, virality and discovery that lead to a positive return on investment from blitzscaling.

Besides discovery and virality, there is also the issue of falling transaction costs. When Google, Facebook and Amazon were founded, you had to maintain your own datacenters and infrastructure. That alone produced a massive barrier to entry that made competition less fierce. Since the advent of AWS and other cloud computing platforms, transactions costs for tech companies have dropped dramatically so you can't rely on infrastructure prowess as a competitive advantage for many tech verticals.

You simply can't compare companies that were born and matured in different markets with different dynamics to those founded in the past 10-15 years. It's apples and oranges.

How’s that working out for them? Name one tech company founded since Facebook that has been massively successful - ie massively profitable.

Becoming a massively profitable megacorp isn't the only winning formula.

Were Linkedin, Instagram, Beats by Dre, WhatsApp, Tableau, Skype, GitHub, MuleSoft all failures because they were acquired for billions, making lucrative paydays for their founders and investors?

You missed the other part of the equation. No one said that all VC money was dumb. The conversation is about billions of funding going down the drain like in the case of Uber compared to the paltry sum inflation adjusted raised by the tech behemoths before they went public and became profitable.

Beats by Dre raised less than $1 billion in funding.

https://www.crunchbase.com/organization/beats-by-dr-dre

WhatsApp raised less than $70 million.

https://www.crunchbase.com/organization/whatsapp#section-ove...

From looking at Crunchbase, Instagram didn’t raise any outside funding.

None of the companies you listed raised anywhere near what Uber, Lyft and AirBnb raised.

That might be because none of these companies are operating in the real world while Uber, Lyft and AirBnB do.

Netflix - created in 1997 with profit from selling Reed Hasting previous company. They IPOed 5 years later in 2002 don't see anything about VC money. Could be some but definitely not the Softbank model back then.

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