If you make $100k in profit, you pay 21% in taxes, so it turns into $79k.
If you instead invest that $100k into growth (eg. ads, sales people, marketers, engineers), you pay $0 of taxes, and can ideally generate an additional $200-300k revenue next year because of the investment.
Would you rather have $79k now, or $200-300k next year?
If you always invest, you'll grow faster and never pay taxes. With this in mind, why would these companies want to be profitable?
The major assumption here is that you have a way to invest $x now into $x+ in the future. A lot of SaaS companies have this down to a science via metrics like CAC, payback period, etc.
The risk section of an S-1, should be taken with a grain of salt. Half the items there are simply cookie cutter templates that simply provide protection if their stock goes to 0 and they get sued. Here's is the exact same line from coinbase's S1
> Due to our limited operating history, it may be difficult to evaluate our business and future prospects, and we may not be able to achieve or maintain profitability in any given period. [1]
If you instead invest that $100k into growth (eg. ads, sales people, marketers, engineers), you pay $0 of taxes, and can ideally generate an additional $200-300k revenue next year because of the investment.
Would you rather have $79k now, or $200-300k next year?
If you always invest, you'll grow faster and never pay taxes. With this in mind, why would these companies want to be profitable?
The major assumption here is that you have a way to invest $x now into $x+ in the future. A lot of SaaS companies have this down to a science via metrics like CAC, payback period, etc.