Founder Issues

What the greatest technology investors say about Founder Issues

Going for Growth vs. Revenue

Rob Hayes Partner First Round Capital

When determining their business model Hayes advises entrepreneurs to consider whether it’s better to initially go for growth or revenue.  There’s conflicting advice on this issue.

Examples of business model strategies and how they played out when acquired:   Hayes believes Google’s $1.6 billion acquisition of UTube was visionary. “[] [Hayes] look[s] at what Google did with UTube [] and everybody thought [Google] was crazy [to pay $1.6 billion for it] and it was absolutely the right thing to do.”  Today UTube is certainly worth several times $1.6 billion. “[] [UTube was a] great buy. [Hayes] think[s] [the] Instagram [acquisition] may be along those same lines.”

Hayes believes the Instagram acquisition was also visionary.  When acquired by Facebook for $1 billion April 2012, the photo-sharing site was experiencing substantial growth but hadn’t generated any real revenue nor tried to make money.  Hayes believes that Instagram’s focus on growth was the right strategy because it was obvious it could eventually generate revenue by nominally charging for filters. 

“[] [If] how you can [eventually] make revenue is obvious, [] then focus on growth [] [and] user acquisition.  [] Distribution is the absolute hardest thing to do with an Internet company. [] [Focusing initially on generating revenue] slows growth and growth is what sells.  Growth is where you get the highest valuations.”  Rob Hayes  This Week in Startups, TWiST #249 Published Apr 18, 2012  @ 15- 20  min;