- Johannes Eisele/Contributor/Getty
- Many of the world’s most valuable tech startups have never been profitable, raising billions of dollars from investors while still losing money every year.
- Tech startups typically focus on rapid growth in their early years, burning through investor cash in order to expand.
- Massive brands like Uber, Snapchat, and Spotify are among those that have yet to make a profit.
- Wall Street is becoming more accepting of this startup model – investors are willing to tolerate negative cash flows for increasingly long periods of time.
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Earlier this year, Snapchat surpassed 200 million daily active users, a milestone for the social media startup. Now, eight years after its founding, Snap – the company that owns the photo-sharing app – is hoping to achieve another milestone: it might start making money.
Snap is just one of many tech companies worth billions of dollars that has never turned a profit. Instead, these startups pour money raised from investors back into growth, losing money yearly.
Investors stay on the hook in the hopes that the companies will one day become profitable, allowing them to cash out. This has worked for some startups – Facebook first turned a profit five years after it was founded, and boosted its profits to $6.9 billion last year. Amazon, founded in 1994, didn’t make a profit until 2001, and was relatively light on profits until recently.
But while startups frequently aim to convince investors that they’re the next Facebook or Amazon, such success stories are rare, and questionable paths to profitability can doom startups. WeWork’s attempt at going public in September failed after investors were unconvinced by the company’s plan to turn around its cash-burning trajectory.
Nonetheless, investment data shows that backers are increasingly willing to support startups that remain unprofitable for long periods of time.
A Pitchbook report published earlier this year showed that, of 100 startups worth more than $1 billion to successfully complete an initial public offering since 2010, 64% were unprofitable. Last year, unprofitable companies that went public fared better than profitable ones, according to Recode.
Here are nine companies that are valued in the billions despite not being profitable.
- Lucy Nicholson/Reuters
Year founded: 2011
Current valuation: $21.7 billion
Net loss in 2018: $1.3 billion
A Snap spokesperson did not respond to Business Insider’s request for comment.
- Courtesy of Zillow
Year founded: 2004
Current valuation: $8.38 billion
Net loss in 2018: $119.9 million
A Zillow spokesperson did not respond to a request for comment.
Year founded: 2009
Current valuation: $29.6 billion
Net loss in 2018: $38.46 million
A Square spokesperson did not respond to a request for comment.
- Mario Tama/Getty Images
Year founded: 2009
Current valuation: $50.4 billion
Net loss in 2018: $1.8 billion
An Uber spokesperson did respond to a request for comment.
Year founded: 2012
Current valuation: $14.59 billion
Net loss in 2018: $911 million
A Lyft spokesperson highlighted that in the company’s third quarter 2019 earnings report, CEO Logan Green said Lyft expects to be profitable by the fourth quarter of 2021.
Year founded: 2009
Current valuation: $10.9 billion
Net loss in 2018: $63 million
While Pinterest has never had a profitable year, it did achieve profitability in the third quarter of 2019, it noted in a shareholder letter.
Year founded: 2010
Current valuation: $4.9 billion
Net loss in 2018: $1.6 billion
A WeWork spokesperson did not respond to a request for comment.
Year founded: 2006
Current valuation: $25.8 billion
Net loss in 2018: $78 million
A Spotify spokesperson did not respond to a request for comment.
- FREDERIC J. BROWN/AFP via Getty Images
Year founded: 2003
Current valuation: $59.3 billion
Net loss in 2018: $976 million
A Tesla spokesperson did not respond to a request for comment.