Venture Capitalist at Theory

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2 minute read / May 4, 2023 /

The Greatest Profitability Turnaround in Software History

Which database generated a -$1.8b loss & within a year produced $130m in profits? Ethereum.


Last year, I compared MongoDB & Ethereum growth to draw a parallel between two major database companies. This year, web3 activity has fallen dragging revenues along for the roller coaster ride.

image Ethereum revenues have collapsed 82%, which makes the earnings change that much starker. What other business suffered a loss of 80% of revenue & went from burning $2b per quarter to producing more than a hundred million in profit?

We could debate whether Ethereum is a company in the same sense as Mongo. The P&L differs from a classic software company.. So does the corporate structure.

Field Value for Q2 23
Fees, $m 293
Supply side fees (cost), $m -41.4
Net Revenue, $m 251.6
Token Incentives, $m -107.2
Earnings, $m 144.4

But set that aside for now. The broader point is that web3 companies can generate significant revenues & profits. The ones that do will thrive. These financial figures can match the very largest web2 counterparts.

Of all the changes this crypto winter will germinate, a focus on revenue & profitability will be the most profound. Investors will value web3 companies as a function of their revenue potential, their revenue growth rates, & their growth efficiencies.

Investment in web3 companies will fall by at least 60% year-over-year in 2023. For that trend to reverse, compelling businesses need to be built.

Ethereum proves the point. Once other projects parallel this revenue success in other categories, venture dollars will surge again.

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