True Story: Dollars vs. Eyeballs in Business Valuation

It was a warm late-spring day in 1999. I sat in my office with a venture capitalist, my lawyer, and my son. The sun beamed in the patio outside my office. We talked about Palo Alto Software and its web subsidiary bplans.com. At one point the VC said:

You wouldn’t be an attractive investment for VCs. You’re too profitable.

I chuckled. I thought it was a joke. We’d grown sales in four years from less than $1 million to more than $5 million annual sales. We had to be profitable because we had no outside money.

He said:

That’s no joke. It’s like the Oklahoma gold rush, a land grab, and the assumption is that if you’re profitable, you’ve stopped too soon. You should be spending more to build traffic.

Those were strange times.

(Image: iDesign/Shutterstock)

Comments

  • Steve says:

    Tim: I was a panel at an Internet conference in 1999 and one of the panelists argued that businesses no longer needed to be profitable -ever. All they had to to do was add eyeballs.

    I disagreed and was booed (really) by the audience with several yelling (really yelling) at me to get off the stage because I didn’t get the new economy.

    You’re right – those were strange times. But before the crash, the parties were great:).

    • Tim Berry says:

      Ha! Thanks Steve, your story is better than mine. And meanwhile, I hear (second hand) that the parties are great again.

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