Thursday, July 30, 2009


Paul Graham runs Y-Combinator, a very successful Tech Startup Incubator. He published a great piece on being "Ramen Profitable" and since so many people who read this blog are budding entrepreneurs, I thought I would repost it. The jist is that you don't have to get profitability quickly, but that you should shoot for "Ramen Profitability" which means the ability to live cheaply on the money your startup is producing. Once you are creating enough to live on, you have a lot of options. Here's my favorite passage:

"Ramen profitability is an unfamiliar idea to most people because it only recently became feasible. It's still not feasible for a lot of startups; it would not be for most biotech startups, for example; but it is for many software startups because they're now so cheap. For many, the only real cost is the founders' living expenses.

The main significance of this type of profitability is that you're no longer at the mercy of investors. If you're still losing money, then eventually you'll either have to raise more or shut down. Once you're ramen profitable this painful choice goes away. You can still raise money, but you don't have to do it now."