It seems that everyone from VCs, to cloud CEOs, to the media, to our own high school kids have all expressed a clear preference for wildly fast-growing companies over slower-growth but solidly profitable ones. The logic is that if you are fast growing, there will be plenty of investors around to fund your losses.
While that may be true for most Silicon Valley start-ups, it may be less true for many small and mid-size companies who don't have the investor connections or who don't promise the gigantic upside they seek.
Perhaps most importantly, traditional companies who want to enter the world of cloud-based, subscription business models usually don't have the patience (or the capital) to continue to fund money-losing new businesses indefinitely. They want profits and they want them sooner, rather than later. So is it possible to get both solid growth and high profits in a cloud-based business model?
By studying the financial performance of hundreds of the world's most successful tech and near-tech companies and comparing them to many of the world's hottest cloud companies, we see some clear patterns emerging that can help business leaders think more completely about the journey to profitable SaaS.
Follow these principles of the Friction Curve:
(Click image to enlarge.)