Discover more from House of Ventures
The Truth About Unit Economics
They are the recent rage.
Because there was a Tech bubble.
And in that bubble, company valuations were based strictly on revenue metrics.
This led B2B & B2C startups to buy lots of users at a high price.
It really benefited Facebook and Google, that's for sure.
Now, Tech companies are being valued by profitability metrics.
You know, like what a real business needs to do, make profits.
So VCs tell their portfolio companies: "Make the unit economics work!"
This, in essence, is correct, but lots of people don't really understand it; let me explain.
The "easy" way to try to achieve better unit economics is to adjust your target audience from an individual user to a group setting.
But, as we saw, even B2B startups that are already selling to group-oriented prospects are being told to work on the unit economics aspect.
The truth is not there. The truth is this:
*Unit economics doesn't mean anything.
*If you look at almost all of the profitable SaaS companies, they have focused on two things to become profitable:
1. Building a super strong brand (PR + Organic Social Dominance)
2. Having a product-led growth method (AKA having a truly awesome product)
Up and coming startups need to understand this and learn from this.
Don't overpay for users.
Build a true and consistent brand.
Consistently improve your product.
And don't let FOMO distract you from your main focus.
Do you agree?