Friday, December 2, 2011

Is Investing In Startups Still Profitable?

Profitable startups don't consume cash; they generate it. Hence, they've got more time. But there are a few things to be taken care for.
Venture investors spent the next three years doing triage, sorting through the rubble to find companies that weren't bleeding cash and could actually be turned into businesses. With Wall Street leery of technology companies, tech IPOs were a receding memory, and mergers and acquisitions became the only path to liquidity for startups and their investors. Venture capitalists worldwide were licking their wounds from the dot-com bust and had little appetite for prospecting in Asia. The region itself was still digging out from the Asian financial crisis, so banks busy clearing the bad loans from their books didn't have much time to take on new risk.
Apple proved again and again, they don't always have to invent new things, they just have to re-invent and do it better. HP ipaq phone and other Tablet PCs were there long before Apple came up with their iPhone and now iPad. They did an awe-inspiring job in every phase of the business which makes Apple an Apple and the rest of them an orange. AppleCare only covers manufacturing faults and this was a cracked screen caused by excessive pressure on the screen. Apple designed the Macbook to withstand normal pressure therefore it is my fault.
Companies worth investing in. Maybe even companies worth catching an airplane from Boston or California to invest in. Companies are making dashboards themselves. We save them time and money. Companies that look at new technologies to support such business models will have success surviving and growing in this turbulent market.
Cashing out is often not as simple as it seems. There are numerous ways of converting the non-liquid asset of equity in a private company to the liquid asset of cash, and each is fraught with it's own unique pitfalls. Cash accounting may help you defer tax burdens in your initial year, but after that, both setups are equal for revenue. Accrual accounting generally help less profitable startups by recognizing revenue when they have the lowest net income (in their initial year) versus when they are more profitable in future periods.
Seems like things are converging and overlapping in new ways every day. Additionally, as computing gets woven more and more into the fabric of our lives, the discrete devices maybe won't matter as much, which probably isn't great for Nokia's brand.
Frank Breinling is the founder of, check out the site and grab a FREE chapter of his ebook
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