TLDR:
Net income (or net profit) is a company’s total revenue minus all expenses, taxes, interest, and depreciation, representing the “bottom line” profitability available to shareholders.
Net Income and Startup Metrics
For early-stage startups, net income is typically negative (a net loss) as companies invest ahead of revenue to achieve scale. Sophisticated investors don’t view early losses as failure — they view them through the lens of whether the investment generates appropriate returns on customer acquisition cost. The relevant question isn’t ‘is the company profitable?’ but ‘is the company on a path to profitability with attractive unit economics?’
The relationship between burning cash and business quality matters enormously. Startups with negative net income should articulate a clear path to profitability — what specific scale or product milestones will flip the P&L to positive? Companies that burn cash while growing revenue quickly are investing in a future return; companies that burn cash while revenue stagnates are simply destroying value. The ‘Rule of 40’ (growth rate + profit margin ≥ 40%) provides a framework for evaluating the tradeoff between growth and profitability.