So 20th Century

It used to be that to survive, businesses had to sell goods or services above cost, and the more the merrier, so simple. But what was obvious when I studied my MBA at Columbia University, sounds now so 20th century!!!
In fact, it looks like that the new way to make it in business is to spend big, grow fast and use huge piles of investor cash to subsidize your losses, with the idea (hope) to become profitable somewhere down the road.
According to data compiled by Jay Ritter, a professor at the University of Florida’s Warrington College of Business, over all, 76 percent of the companies that went public last year in the United States were unprofitable on a pre-share basis in the year leading up to their initial offerings, and that is the largest number since the peak of the dot-com boom in 2000, when 81 percent of newly public companies were unprofitable, does it ring a bell to you?
As Kevin Roses in his insightful article ”Profit?, who needs it?” published on the New York Times International on May 16, wrote: “Silicon Valley has written the playbook for spending money in pursuit of growth”. Furthermore, the tech industry remains a hotbed of fast-growing yet unprofitable companies. Uber which is expected to go public this year, reportedly lost $4.5billion last year as it sought to expend internationally and fought price wars with competitors including Lyft. Snap lost $3.4billion last year, its first as a public company. Airbnb just had its first profitable year after a decade of investor-backed losses.
The rise of unprofitable companies is partly the result of growth in the technology and biotech sectors, continues Mr. Roses, where companies tend to lose money for years as thy spend on customer acquisition and research development. BUT it also reflects the willingness of shareholders and deep-pocketed private investors to keep fast-growing up-starts afloat long enough to conquer a potential “winner-take-all” market.
The current crop of money-losing companies may not survive forever, but as long as someone is willing to keep funding such gambles, there’s no reason as end customer to stop enjoying the fruits of their optimism.
The question is, what does it mean for the thousands of start-ups forced into a game of growth at any price, and for the business Angels and professional investors without those deep pockets. I am afraid most of them would do not have any realistic chance of creating value (in the 20th century sense of the word) along that road.