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    A cash-and-dividend model for AI data businesses

    A post argues AI data businesses can become profitable quickly and should favor revenue-sharing compensation over fixed salaries.

    Gokul RajaramGR
    1 Source, 1h ago, first seen 1h ago

    TLDR

    A post argues that most AI data businesses should be run to generate cash and pay dividends. It recommends revenue-sharing compensation and a small angel round rather than VC funding. In its illustrative example, a $1 million investment buys a 10% stake; if the business makes $10 million in first-year profit and pays out $8 million, the investor receives $800,000.

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    1 Source, first seen 1h ago

    Combined views

    10.2K

    1 Source, first seen 1h ago

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    1 Source

    Gokul Rajaram@gokulrCash / Dividend Businesses Most AI data businesses should run as cash / dividend businesses. They can get profitable very quickly and start throwing off cash immediately. (PS: This is another lesson from Ads days. Many SEM businesses twenty years ago started doing this after they realized it was easy to build cash revenues but hard to build durable equity value). Implications: - Compensation should be revenue share vs fixed salaries: Both employees and contractors should be on a revenue share model, where they get some % of the revenue they bring in. (There are various ways to attribute revenue). I've recently met a few companies that are doing this. - Only raise a small angel round of sub-$1M: You can easily get Labs contracts on a small raise. Not going to VCs also gives you the flexibility to dividend out profits. VCs are not really equipped or structured to take dividends. Rough math: -- Raise $1M on $10M post. Investor owns 10%. -- Get to $50M gross revenue run rate by end of year 1, $35M net revenue run rate, which means $17M in-year revenue. Say $10M profit (after lending costs due to working capital issues). Dividend out 80% while keeping 20% on balance sheet. That's $8m dividend-ed out in year 1. Investor gets 80% back! Ping me if you're interested in finding an investor for this model (Small raise + Dividends) who can also help you with working capital stuff, which is becoming a bigger and bigger issue.1h