“VC-Backed Startup Is Profitable” should not be a headline worth making. But far too many Web 2.0 ventures don’t bring in enough revenue, let alone profits, and some don’t even have a revenue model. We see a lot of gritty entrepreneurs with profitable bootstrapped SaaS ventures. But the number of VC-backed startups less than 5 years old that are profitable is sadly low. That’s why we wrote about Blurb back in October 2008.
The Update
Like an increasing number of private companies, Blurb is starting to report its financial results publicly, almost as if it were a public company. This presumably serves the purpose of both reassuring customers that the business is healthy and attracting potential acquirers.
Allow us to quote shamelessly from Blurb’s press release (at least it prevents errors):
“Blurb, the creative publishing platform, today reported a year of record growth in 2008 with revenues approaching $30 million. The company reached profitability and achieved nearly 200% year-over-year revenue growth in 2008.”
Quiz: which would you prefer: a company with $200 million in advertising revenue that is burning cash, or a business with $30 million in subscription revenue that is profitable? The first describes Facebook, the second describes Blurb. Yes, it is almost absurd to make the comparison. But the point is that old business maxim: revenue is vanity, and profit is sanity.
What Does this Tell Us About the Economy?
On the face of it, not much. Blurb’s business is partly seasonal; people buy more during the holiday season. We asked Eileen Gittins, the company’s CEO. She sounded almost surprised, not at all triumphant, and generally cautious. Which is a reasonable reaction of anybody doing fairly well in today’s economy. Eileen confirmed that January is also looking good: 30% over projections. So this is not just a holiday buying story; it’s more about what specifically Blurb offers.
What Does this Tell Us About Blurb’s Market?
Eileen attributed the good results to three factors:
- Pent-up demand to write books. Who doesn’t have a book they have always wanted to write? It is now easier than ever to publish (if not write) a book.
- The cultural shift of people becoming more active contributors to media, as writers as well as readers.
- The forced leisure that layoffs create, and the desire to do something that one has some control over and can point to as an achievement. This may be exacerbated by the bad times: get laid off from a big job, take three months to write a book about what you know, do it well and you’ll be back in demand pretty soon.
There is one simpler explanation that we see. In tough times, affordable luxuries that provide a high level of emotional satisfaction do well: think movies, roses, and booze.
