A great, and very topical, discussion took place today at one of the most interestingly titled panels at SXSW: “Unsexy and Profitable. Making $$ Without the Hype.” What did they decide? As usual, it depends.
Hosted by TechCrunch‘s Paul Carr (who is British and hilarious – the two are closely related), the panel discussed the viability of being a business when you don’t make any money, don’t have any revenue of any sort, aren’t profitable, and don’t have a plan to become so. Amazingly, there are several big-name companies who fall into this category, including both Twitter and (before they were bought by Google) YouTube.
The other end of the spectrum is represented by the companies who were on the panel, including lunch.com, uship.com, and campusbookrentals.com. Both uShip and CampusBookRentals are profitable, but decidedly unsexy. UShip works to coordinate transportation between people who ship things (generally trucking companies) and people who have shipping needs, and CampusBookRentals does just that – rents textbooks to college students at a rate cheaper than buying the book for the whole semester.
Where are they similar? They make money. They aren’t flashy, don’t spend money on PR firms or major advertising campaigns, but they do manage to serve customers’ needs on a continuing basis, and have a product that people are willing to pay for. That last part, getting people to pay for your product, is especially hard in today’s world of “sexy” 2.0 dreams, where everything is free, easy, and immediate.
The statistics don’t lie – your startup is likely not going to get bought by Google. Venture Capitalists don’t give money to companies without a solid plan for turning revenue (generally – Twitter seems to be the major exception to this rule), and if you can’t make any money, you’re not really a business – you’re just running a project without enough direction.
The debate about what makes a startup a startup can be saved for another post, but the bottom line of this panel is that it’s okay (even cool) to be unsexy as a business. It’s far more important that you have revenue, a plan to maintain the revenue (or grow it), and have decided if you’re in that business for the long haul or if you need a viable exit strategy.
As an aside, if you’re looking to sell your business and get out, having a revenue generating product is a great start.
More lessons from SXSW are on the way in this space – stay tuned.