Consider this: the primary goal of most business plans is to devise a way for a start-up to not only become profitable quickly, but to sustain those revenues - particularly in this market. So, isn't it starting to seem increasingly crazy that VCs are still enthusiastically funding Web 2.0 businesses that haven't been able to monetize themselves? Even during the good times it only seemed semi-acceptable that VCs were throwing millions in funding and billion dollar valuations at companies that weren't turning a substantial profit—like Facebook and Twitter. But now that the economy has taken a precipitous turn, and VCs firms are encouraging their portfolio companies to lay off staff, cut costs, and most significantly, "get profitable," can they in good faith continue to fund those businesses that aren't pulling their own in terms of revenues? Sure, companies like Facebook, MySpace, and Twitter are popular and, theoretically, that popularity should translate into dollars. The trouble is, it hasn't.

Today's New York Times takes a look at this point, comparing two competing start-ups—microblogging site Twitter and the copycat start-up Yammer—and their business plans. While there's subtle differences between the two companies, the main distinction is that Yammer makes money. Twitter doesn't. They says that their plan is to grow first, and monetize second. Yammer has taken the opposite approach—making money so they can grow. What's unclear is who got it right. The Times puts it well:

"Now, as the global economy enters a severe downturn, the relative merits of these two philosophies will be tested."

While a profitable business model and money in hand usually trumps everything else, there's no question that there's value in Twitter's popularity and substantial user base. Or, at least that's what the VCs backing them seem to think. Fred Wilson of Union Square Ventures, the VC firm who funds Twitter, told Wired last week:

"It's like the stupidest question in the world: How's Twitter going to make money? "It's like 'How was Google going to make money?'

Eventually Google was going to make money and they figured out how to do it and they figured out a great business, and I think the same thing is true with Twitter."

We'll ignore that it's by no means a foregone conclusion that Twitter will make money. But, let's operate on the presumption that they—and other Web 2.0 start-ups—will. The question, then, is how long VCs are willing to wait it out. Facebook says they'll have a business plan within three years. Twitter says they're going to try to figure something out in the next year. Yet VCs are frantically telling start-ups to get cash flow positive and profitable right now. Shouldn't smart VCs ask themselves how much a start-up's popularity is actually worth if they're not making any money off it?

What do you think?