It used to be that in order to survive, businesses had to sell goods or services above cost. But that model is so 20th century. The new way to make it in business is to spend big, grow fast and use Kilimanjaro-size piles of investor cash to subsidize your losses, with a plan to become profitable somewhere down the road.

Over all, 76 percent of the companies that went public last year were unprofitable on a per-share basis in the year leading up to their initial offerings, according to data compiled by Jay Ritter, a professor at the University of Florida's Warrington College of Business. That was the largest number since the peak of the dot-com boom in 2000, when 81 percent of newly public companies were unprofitable. Of the 15 technology companies that have gone public so far in 2018, only three had positive earnings per share in the preceding year, according to Mr. Ritter.


The rise in unprofitable companies is partly the result of growth in the technology and biotech sectors, where companies tend to lose money for years as they spend on customer acquisition and research and development, Mr. Ritter said. But it also reflects the willingness of shareholders and deep-pocketed private investors to keep fast-growing upstarts afloat long enough to conquer a potential "winner-take-all" market. Today's public tech companies generally earn more revenue than their dot-com era counterparts, and could find it easier to flip the profit switch once they've reached a sufficient size.

"The fact that Google and Facebook were able to generate such enormous profits and growth does give hope to some companies," Mr. Ritter said. If start-ups can figure out to convert a large user base into paying customers, he added, "it can be enormously profitable."

Smells like a mega-credit bubble to us...

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