What founders, investors and authors say works — summarised in plain words, linked to
the source, and tried on the businesses we run. When enough of them have tried it, we say whether it worked.
121 classics · all free0 being tested0 with a verdict5 businesses before a verdict
Paul Graham: Co-founded Y Combinator, the startup program behind Airbnb, Dropbox, Stripe and Reddit.
“Ramen profitable means a startup makes just enough to pay the founders' living expenses.”
Earning just enough to cover the founders' basic costs, by whatever means, ends dependence on investors, lifts morale and buys time. It is a way to avoid dying on the way, not the goal, and the money need not come from the final business model.
When it applies: You are early, spending more than you earn, and survival depends on outside money or a fixed budget.
Paul Graham: Co-founded Y Combinator, the startup program behind Airbnb, Dropbox, Stripe and Reddit.
“by default do they live or die?”
Founders should keep checking whether, at current costs and recent revenue growth, the money left will carry them to profitability. If not, they need a written fallback plan rather than a hope that investors will step in; hiring too fast is the usual way companies become default dead.
When it applies: The business has been running for several months and still spends more than it earns.
Paul Graham: Co-founded Y Combinator, the startup program behind Airbnb, Dropbox, Stripe and Reddit.
“Treat investors as saying no till they unequivocally say yes, in the form of a definite offer with no contingencies.”
Fundraising stalls everything else, so do it in one concentrated push: talk to many investors at once, ranked by how likely they are to commit and how much, count nothing as raised until there is a firm offer, land the first serious commitment, and close money fast. Your strongest position is having a plan that reaches profitability with no new money at all.
When it applies: A company already growing quickly has decided that outside investment would let it grow faster.
Reid Hoffman: Co-founded LinkedIn; early PayPal executive and early investor in Facebook and Airbnb.
“Rather, blitzscaling is prioritizing speed over efficiency in the face of uncertainty.”
When a new market is likely to go to whoever gets big first, deliberately trade efficiency for speed: spend heavily, hire fast and accept waste and disorder, betting that the cost of being inefficient is smaller than the cost of losing the market to a faster rival.
When it applies: A large, winner-take-most market is opening up and investors are willing to fund growth well ahead of revenue.
Contested. If the market turns out not to be winner-take-most, or funding dries up, the company is left with costs it cannot cover; waste is certain while the win is not; speed-first cultures have been linked to legal and ethical lapses (see the Uber Files reporting under 'Ask forgiveness, not permission').
Jason Fried: Co-founded 37signals, maker of Basecamp; co-wrote the bestseller Rework.
David Heinemeier Hansson: Created Ruby on Rails, the toolkit behind early Twitter, GitHub and Shopify.
Most businesses do not need outside investors: start small, build the least that people will pay for, charge from day one and keep costs and headcount low, so the business pays for itself and the founders keep control of what it does and how fast it grows.
When it applies: The product can earn money early, and the founders value independence more than the fastest possible growth.
John Mullins: London Business School professor who studies how entrepreneurs fund their growth.
Before chasing investors, design the business so customers pay before you have to spend. Mullins describes five ways: matchmaking between buyers and sellers without holding stock, taking payment in advance, up-front subscriptions, limited-time or limited-stock sales, and selling a service first then turning it into a product. Customer cash then funds the build.
When it applies: Customers want the offer enough to pay before delivery, or the business can sit between buyers and sellers without holding inventory.
Lighter Capital: Seattle lender that offers revenue-based financing to tech startups.
Instead of selling shares, take a lump sum and repay it as a fixed share of each month's revenue until an agreed total (the amount borrowed plus a flat fee, set as a multiple such as 1.2x) is reached. Payments shrink in slow months and grow in good ones, and the founders keep full ownership.
When it applies: A business already has steady recurring revenue and healthy margins and wants growth money without giving up equity or a board seat.
Can't test here
Needs an outside lender and a recurring-revenue track record most of our businesses lack; taking on debt is an owner decision, not an experiment.
Bill Gurley: Benchmark venture capitalist who backed Uber, Zillow and OpenTable early.
“Achieving profitability is the most liberating action a startup can accomplish.”
For years, boardrooms treated growth as worth any price, covering huge losses with ever-larger private rounds at ever-higher valuations. Gurley, a venture investor, argues this holds only while new money keeps arriving; when it stops, heavy spending and inflated valuations force painful refinancing on terms that hurt founders and staff, so the safest escape is reaching profitability.
When it applies: A company spends far more than it earns and its plan depends on raising its next round at a higher valuation.
Contested. The business may never become profitable once the subsidy stops; long commitments (leases, staff, debt) outlast the funding; down rounds can wipe out founder and employee stakes. WeWork is the standard case: valued at $47bn at its peak, it signed long leases to rent out as short-term space, its 2019 attempt to go public collapsed, and it filed for Chapter 11 in November 2023 listing about $15bn of assets against more than $18bn of debt.
The Zebras Unite founders: Four founders who started Zebras Unite, a movement for profitable, community-minded companies.
Venture capital's hunt for billion-dollar 'unicorns' pushes companies toward winner-take-all growth that serves investors more than customers or communities. The authors propose 'zebras': companies that are both profitable and purpose-driven, grow at a sustainable pace, and need different kinds of funding and ownership to match.
When it applies: A founder wants a durable, profitable company with a social purpose that will never produce the outsized returns venture funds need.
Can't test here
It is about who funds and owns the company and what it is for; there is nothing a small business can switch on and measure within months.