It's easy to believe that letting go of employees before finding product market fit was the right move, and maybe they never would have never been able to build and grow Twitch under the existing structure. But given that at least one of the products sold for a billion dollars, this seems like a textbook example of a company that did deserve more money based on having built a good platform but not yet having the required traction.
If investors knew the company was going to sell for over a billion dollars, would they really not have invested? Maybe this is the case, but it doesn't seem like it. Instead it seems like the investors didn't believe the company would actually sell for a billion dollars based on the growth rate to date.
I’d lean more towards their story being path dependent.
My hunch is they had to go through lean times to be able to focus harder on customers and eventually create a product that could take the company to an IPO. If you’re not lean, management is most likely distracted with the internal company and organizational overhead than you are with external customers.
No way to prove this (because we can’t recreate the exact scenario) however.
We didn’t deserve more money when things weren’t working. It’s the investors who decide who deserves more money and if you are setup to need their money you better learn their rules and figure out how to convince them to give it to you.
I think here deserve is the wrong term, semantically speaking.
Investors do not decide who "deserves" more money, they decide who GETS it.
Deserving is more a moral term and makes things confusing: a company could deserve the money but not get it because they are not good enough at fundraising, or they need the money at a time when money is very hard to get etc. And many companies get money without deserving it because some investors are stupid, or because they are way too good at looking shiny.
I realize that in practice you're very unlikely to get money without having traction. But if we're talking about which companies are deserving of money, if such a category exists, then surely the ones that go on to succeed must (in most cases) make the cut. Especially when they succeed despite having not gotten the money.
I also get what you're saying though, in terms of the companies that deserve money are the ones that can convince investors that they deserve money.
If investors knew the company was going to sell for over a billion dollars, would they really not have invested? Maybe this is the case, but it doesn't seem like it. Instead it seems like the investors didn't believe the company would actually sell for a billion dollars based on the growth rate to date.