Here’s a counterintuitive reality that most founders discover too late: being profitable can hurt your startup’s valuation. While every business school teaches that profitability is the ultimate goal, the venture capital ecosystem operates on a different logic entirely.
Stewart Butterfield had already sunk $17.2 million into Glitch, his ambitious gaming startup, when reality hit. Despite 45 employees and years of development, the game wasn’t scaling. “We came to the conclusion that Glitch was never going to be the kind of business that would have justified the $17.2 million in venture capital investment,” Butterfield later admitted. The decision to shut it down and pivot to Slack’s internal messaging tool? That became a $27.7 billion acquisition.
Christina Cacioppo had a revelation that would reshape how startups approach product development. In 2018, instead of building a minimum viable product for Vanta’s SOC 2 compliance tool, she created a spreadsheet. Not a prototype. Not a wireframe. A literal spreadsheet.
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