any crazy idea is funded in hopes gains traction, go PUBLIC. get rich like buying a lottery ticket, only less odd SOCIAL MEDIA. they don't make anything. they don't sell anything. FAD
Some ideas just take off though, I heard about this company that picks up your laundry in London using an app. Pretty awesome
The startup and VC investment model is fundamentally different than the model you would use if you were running a mature company, which leads to a lot of confusion like this. A VC invests in 100 companies planning for 75 to fail completely, 10 to break even, 10 to do OK, and 5 to make the returns for the fund. Pretty much every venture backed company with a big exit would have been considered a dumb idea by the "smart money" at the time VCs invested. They're not going to invest in anyone who walks through the door, but they have a much higher tolerance and indeed expectation of failure than you would be used to as an public equity investor. For this investment strategy to work, you can only invest in companies with potential multi-billion markets, because every investment has to have the potential to be one of the 5 that make the fund's returns. Every company needs to scale rapidly, which means they need to take a lot of cash and spend almost all of it to reach scale and profitability as quickly as possible. If you get $100M from a VC and only spend $1M they're not going to be happy because you really wasted the money that they gave you to spend to achieve a certain set of results. You need to show that you can either scale or fail rapidly, paradoxically they'd rather you failed early than just grew at 10% for 20 years while sucking up their management time. When you look through that lense, it makes sense that you spend at an unsustainable rate to grow to scale as fast as you can. It's what your investors expect you to do and they'd be mad if you did otherwise. So yes, Alfred is burning through their VC cash at an unsustainable rate. It's exactly what their VCs expect them to be doing. If they do reach scale they'll eventually have minimum wage employees doing grunt work and the initial higher paid employees will be in management, but for now it's important to attract high quality employees you pay well so that you can get and keep customers, build a brand, and grow exponentially. If it turns out this model doesn't work, they'll fail quickly and the VCs won't be too upset because its what they statistically expected, but as with most startups you won't know till you try. This model isn't for everyone, but there are plenty of well-off VCs, LPs, and successful venture backed entrepreneurs to show that it's not a model you can reject as stupid just because you don't really understand it. I personally don't like to be the entrepreneur in that kind of model, but that's personal preference and I don't confuse that with thinking the model itself is flawed.