Neat analysis. My expectation of the stock market is that valuations (PE ratios) will continue to drop until we see the average in the 5-9 range, or about half of where we are today. Accordingly, I’m building my business to generate (gasp!) dividends. Needless to say, it’s pretty much impossible to raise money with that perspective. However, I think having an eye firmly on achieving early profitability is the way to go these days.

I worked for a rocket ship (Pivotal) back in the 90’s, and we spent a ton of cash without ever breaking a profit, primarily because the investors demanded it! I think the venture capital industry needs to come up with some new ideas on what is an acceptable business model, because the 90’s-style hockey-stick is simply not the way of the future.