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Which types of startups are most often profitable? – TechCrunch

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One answer: E-commerce, Chrome extensions, mobile apps, enterprise SaaS, SMB SaaS — in that order

I co-run an agency that teaches a hundred startups per year how to do growth marketing. This gives me a unique vantage point: I know which types of startups most often reach profitability.

That’s an important metric, because startups that don’t reach this milestone typically fail to raise additional funding — then die.

Here’s what we’ll learn:

  1. Companies are increasingly living and dying by ads. Because it’s the startup’s approach to customer acquisition — not its business model or market — that most determines its early-stage profitability.
  2. E-commerce companies lend themselves best to ads, and SMB SaaS the worst. Meanwhile, most startup founders in 2019 are starting SaaS companies. They’d benefit from the data we share in this post.
  3. In fact, our agency has found that every other type of business reaches profitability quicker than SMB SaaS, including mobile apps, Chrome extensions and enterprise SaaS.

Our sampling of startups isn’t as biased as startup valuation leaderboards, because we also see those that failed. That’s the key.

You can use our experience to de-risk your startup. That’s what this post explores: How to change your product roadmap to pursue a path more likely to reach profitability.

The startups that frequently reach profitability

Here’s the data my agency is referencing for this post:

  • We train 12+ venture-backed and bootstrapped startups every month. Half are Y Combinator graduates. This is how we study early-stage product-market fit trends.
  • We run ads full-time for between 20 and 30 mature companies per year. On average, each spends $2.5 million annually on paid acquisition. And, on average, each has 30 employees. Our clients include Tovala.com, PerfectKeto.com, SPYSCAPE.com, ImperfectProduce.com, Clearbit.com and Woodpath.com.
  • Our students and clients are roughly evenly distributed across D2C e-commerce, B2B, mobile apps and marketplaces.

When we try to control for founder skill and funds raised, the types of startups that first reach profitability do so in this order:

  1. E-commerce
  2. Chrome extensions
  3. Mobile apps
  4. Enterprise SaaS
  5. Small-to-medium business SaaS

On average, an e-commerce company is more likely to first reach profitability than an SMB SaaS company.

Before I explain why, let me explain how we’re differentiating startups: I use the word “type” instead of “business model” or “markets” because I’ve learned that business model and market are often not the best predictors of success. Instead, it’s your approach to customer acquisition. That’s what typically determines the likelihood of profitability.

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Boeing 737 MAX packed with journalists completes first flight

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Boeing was hit very hard when the US government banned its 737 MAX passenger airliner for 20 months. On Wednesday, the aircraft staged its first flight with media onboard since the fleet was grounded by the government. Boeing is desperate to show passengers and airliners that the 737 MAX is safe and ready for operation.

The test flight was conducted by American Airlines and spent 45 minutes traveling from Dallas, Texas to Tulsa, Oklahoma. The test flight was conducted weeks before the first commercial passenger flight will happen on December 29. Boeing and American Airlines held the flight to help eliminate any concerns about aircraft safety.

The massive aircraft was grounded in March 2019 after two crashes happened within five months, killing 346 people. The media flight was the first time anyone other than regulators and industry personnel flew on the 737 MAX since it was grounded. The flight had roughly 90 people aboard, who all wore masks due to the coronavirus pandemic.

Boeing’s aircraft was cleared by the FAA last month after the aircraft received design changes and new training for pilots. Boeing needs the aircraft’s return to service to go very smoothly as the aircraft is critical for the company’s reputation and finances. Hundreds of billions of dollars are on the line, with airlines worldwide having spent hundreds of billions of dollars purchasing aircraft.

Reports indicate that the aircraft has been discounted significantly to help lure carriers who may be wary of the aircraft to purchase. Boeing has a 24-hour situation room that monitors every 737 MAX flight globally. The company says it will continue to work closely with global regulators and customers to return the fleet to service safely.

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Facebook might finally be sued by the US government next week

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The political landscape in the US hasn’t yet stabilized almost a month after one of the most important elections in its recent history. It is perhaps because of that state of flux that government officials under the current administration are moving quickly to wrap things up while they can. Last month saw Google formally sued for monopolistic business practices and TikTok’s fate could very well be decided this Friday. Next week will see yet another high-profile legal drama when the US government slaps Facebook with an antitrust lawsuit of its own.

It seems almost ironic that Facebook would be the last Big Tech company this year to get formally sued considering it was one of the first to get into legal trouble with the US government. Although the Trump administration formally started inquiries and investigations into Google, Facebook, Apple, and Amazon only last year, Facebook’s name has already been dragged into the spotlight right after the previous presidential election. But while those previous issues centered around election interference and privacy, this lawsuit will instead focus on anti-competitive practices.

Reuters sources aren’t yet certain on what points the lawsuit will include but it is almost certain that it will involve its acquisition of Instagram and WhatsApp. The social media giant has been accused of buying up smaller rivals in order to gain monopoly of the market. Facebook argued that it actually helped those become market leaders instead.

Given its already negative reputation in the public’s and the government’s eyes, Facebook might face an uphill battle to make judges see things from its point of view. It doesn’t help its case that, despite the numerous scandals it has been involved in, Facebook remains a powerhouse and influential company, even with the competitors that the social media giant says disproves allegations of monopoly.

According to one source, as many as 40 states will sign the lawsuit that will be filed next week. The FTC is also reportedly considering filing a separate but related complaint with a district or administrative law judge. No date for the FTC’s lawsuit has been shared.

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Google News Showcase tries to address the paywall elephant in the room

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While many praise and thank Google for making information and news available to the masses on the Internet, others, especially publishers, hate it for almost the same reason. Some have even sued Google for putting directly in Search results content that should otherwise be viewed on the content owner’s website. And then there’s paywalled content that effectively blocks users from accessing those without paying a fee. In order to better promote its News platform, Google is negotiating with publishers in order to provide some locked content to readers for absolutely no charge at all.

To be clear, Google isn’t just making available paywalled content for free at the expense of publishers that own them. It will be the one publishing partners that are taking part in this relatively new Google News Showcase program. Even then, only select articles will be made available for free, pretty much like a trial or appetizer.

There are, however, more caveats to this seemingly generous offer. The biggest one for people will be the requirement to still register for each and every publisher they want to view paywalled content from. This, Google says, is so that publishing partners can build relationships with readers, which is to say that they will send you regular communications (read: spam) to convince you to sign up and pay for a subscription.

Another limit of this paywall program is that Google News Showcase itself isn’t available in all regions of the world. Google only names Germany, Brazil, Argentina, France, the UK, and Australia as some of the few but it is working to expand its reach to more countries. Courting US publishers might be trickier than in other countries.

Google is also working to expand Showcase beyond Android and iOS to Google News on the Web and its Discover feature. Together with a new panel for curating important local and national news from users’ favorite publishers, Google is more aggressively pushing its platform as the new way people could get their daily news fix and not from Facebook or Twitter.

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