There’s a great article in this month’s BC Business Magazine by VC Brent Holliday titled The Profit Myth that deserves a read.
A smart technology-industry observer here in the Northwest had a great saying when he spoke of the dot-com companies that flashed and fizzled last decade: Profits: Nature’s Way of Saying You Belong. Mark Anderson made and sold T-shirts and bumper stickers that tech geeks like me thought were hilarious. The rest of you are probably scratching your heads and saying, No kidding. Why is that funny?
Mark was mocking the fact that investors poured millions of dollars into ridiculous opportunities in the hopes of a quick flip. Many were burned in the tech collapse of mid-2000. When that famous bubble burst, many companies went extinct because they failed to make profits. Last month in this space, I talked about the Darwinian effect that economic downturns can have across industries. Why, then, are there tech companies that, having never made a dime, managed to survive the last meltdown – and may even survive the current economic mess?
Holliday goes on to refer to three long-standing Vancouver technology companies as exhibits in his analysis – Intrinsyc Software, Absolute Software, and Ballard Power Systems. Combined these three companies have accumulated losses totalling $964 Million.
Apparently profits aren’t always a prequisite to building a successful company but Holliday wonders aloud if these growth companies can continue to pile up losses in our “new economy” or if “nature” will kick in as investors tire of funding the dream.