Actually, the Danish economy was a lot more interesting (read more complex and diverse) a decade or two decades ago. Lots of mid-sized engineering companies, for instance. The government is rightly worried about things becoming a Novo Nordisk monoculture, becoming fragile, and ending up like Finland. Novo Nordisk is facing tough competition from Eli Lilly and many other pharmas, who have better GLP-1 drugs but were slower in their development.
I tried to ask examples of this yesterday[1], but afaik the patterns seems to be think throwing money at the problems works in undifferentiated, maybe transactional categories like food delivery, ride share, e-commerce etc where the software is not the product, it's just the payment method or the market place. The market places are also localized so you have these countless local turf wars, until you regain some kind of dominance or balance. Then deep tech, hardware etc is harder where you need large initial investment. Social networks because they need the critical mass, and usually there isn't a direct business model available.
I'd argue most b2b/enterprise software is a new version of something that already exists or addressing a need that already has a market. Business model is also very clear, there is very little network effects usually other than reputation and customer proof. Yet most the startups not even close being profitable.
In my mind most software products are differentiated so in the end the main success comes from getting the differentiation right for the market, not outspending the competition.
"Venture debt is like a delicious sandwich that only costs ten cents, but occasionally explodes in your face" - PG
Part of being a startup is still that there is not a lot of historical precedent and uncertainty how well your business will do in the future. The problem with any fundraise is that it's always future looking (perhaps maybe you create some kind of option structure to call on it if needed).
VCs, especially Tier 1, can be still helpful in different ways, and them owning equity aligns the incentives more than debt.
Correct. Those raises were made when there was some uncertainty about how the business would grow, and the opportunity and timing seemed right. For example, in 2022, it was difficult to predict how deep the market downturn would be. We saw several customers churn because their companies folded. In the end, the market didn't tank as bad than some expected, and we executed better than anticipated. In hindsight, we might not have needed that funding, but at the time, the outlook wasn’t as clear.
Part of this post is to debunk the myth that can be VC backed startup, be profitable and grow fast at the same time. VCs are quite keen in this approach too.
I wrote this to challenge the common dichotomy that startups are either VC-backed money-burning machines or anti-VC/profitably bootstrapped. It doesn’t have to be that binary. There’s a spectrum, a middle ground. You can retain control by being profitable while still using funding as leverage or as a safety net if things don’t go as planned.
One of the paradoxes of fundraising is that it’s easiest when you don’t need the money—and almost impossible when you do. By keeping the company mostly profitable, you never have to need it, giving you full control over timing and the ability to choose the right deal. But having that funding can enable you some more leverage or add more risk business you could afford while being bootstrapped. In our case we raised the funding for the conservative case, but the reality turned much better than expected.
Another misconception is that sustainable growth comes from spending or hiring. In reality, many great products take off first and because they take off, any amount of hiring becomes justified. Some of these companies are even profitable before they go on a hiring spree. The problem is that the typical approach isn’t nuanced or intentional enough. You might decide to hire 100 engineers before knowing how the next 10 engineers impact your trajectory. If you cut the hiring plan in half—or even to a quarter—it might not affect growth at all. But there’s often an assumption that growing the team is also good, and maybe it comes from a time in the 90s or something when you had hire people to man the phones to take orders.
What I believe is that startup’s growth is primarily driven by product superiority and market fit, not just by headcount or marketing spend. Those things can amplify success, and in some cases, they can even mask a bad market fit through sheer force of sales and marketing.
A less cynical take on VCs is that they’re not necessarily pushing companies to burn cash they just want founders to double down when they see a company working. But whether you can truly scale depends on your market dynamics. Sometimes, you need time to learn or to land the right deals in a segment before pouring money into growth.
The problem is that the current thinking is often too simplistic. Since you're startup and have cash, the spending more is always the right move. Going all the way 100 when you could dial it down to 50 or 30 and regain control and de-risk the changes of complete flare out.
I think your point would've been clearer if you clarified up front that Linear has taken 50M+ in funding. You would have clearly indicated where in the range of middle ground you are speaking from.
I know of YC startups that have taken <1M in funding and are now profitable. Similarly, the Discord founders (995M+ funding) have dropped hints on this very website several times that they are now profitable, but they would be laughed out of this room if they tried to outright claim that they are a "Profitable Startup". To say that Linear's story is comparable to any of these is, well, a stretch.
Thank you for writing this and sharing this perspective. It's nice to see a quality-focused company winning purely on the merits of their product. I've found it deeply frustrating to watch what used to be considered "running a business" (building profitable products/services) get snubbed in favor of half-baked cash furnaces that spin their tires.
Very encouraging to see this. Congrats on achieving profitability and staying profitable. Excited to see what the Linear crew comes up with next.
Can confirm, that was the last project I worked on that had SSR; fancy product website / e-commerce, combined data from a CMS-as-a-service and a webshop-as-a-service, rendered pages in one go using Gatsby, published it. I believe that was the best of both (SSR / webapp) worlds, in that it was both fast and indexable in a static context, and if the user had JS enabled and the page was hydrated, navigation was super fast and lightweight because only some JSON went over the line.
I'm not sure if I would do it again though, but we'll cross that bridge when we get to it.
All other things being equal, sure. But I'm probably not paying thousands of dollars to save a few hours. Maybe if that amount of money is basically pocket lint, but that's a tiny percentage of the population.
Soviets attacked Finland, and brought it in to the war. Finland didn't want to become a part of Soviet Union (btw no-one did willingly) and Axis was fighting against Soviet Union.
Pouring one out. I remember using Pivotal Tracker back when working in a Ruby on Rails shop and enjoying directness and how optioned it was of it.
Then several years later, after working in large Silicon Valley tech companies, and seeing how they run with Jira, I decided to start https://linear.app
So much team's time and effort went in to configuring their tools instead of actually working on things. We do more than PT did, but aim to keep the experience straightforward and focused, regardless of the size of your team or company.
We look at AI as capability similar to any other technology. Instead of jumping on the AI bandwagon or thinking AI is a feature, we look if there is opportunity to reduce friction or help the user well in the workflow they are doing. Today like the AI can inform if there is duplicate issues being reported or improve the titles you submit from Slack conversion.
