Loss-Making Unicorns - Flipkart, Paytm, Uber, Ola, Snapdeal
by Ms. Richa Agarwal Research Analyst, EquityMaster.com
Got a
disruptive and new business idea? Have a great story? A technical background?
And some experience too? Great.
You qualify to enter the privileged world of
startups. Startups are mushrooming. And so are the angel investors funding
them.
Flipkart, Paytm, Uber, Ola, Snapdeal.... you will find these names littered across financial dailies.
As per Economic Survey 2015-16, India has more than 19,000 technology-enabled startups, led by consumer internet and financial services companies. Indian startups raised US$3.5 billion in funding in the first half of 2015.
Flipkart, Paytm, Uber, Ola, Snapdeal.... you will find these names littered across financial dailies.
As per Economic Survey 2015-16, India has more than 19,000 technology-enabled startups, led by consumer internet and financial services companies. Indian startups raised US$3.5 billion in funding in the first half of 2015.
As of December 2015, 8 Indian startups belonged to the
'unicorn club' (ventures valued at US$1 billion and upwards).
The spotlight keeps shifting. First it was Flipkart, which once had Infosys-beating valuations...before they were revised down more than 60%. Today, it's Paytm hogging the limelight.
With the startup fever, a whole new jargon has come into effect. Data integral to a sustainable business - profits, leverage, return on capital, cash flow - have become old fashioned. Fancy metrics like app installations, gross merchandise value, number of users - any creative term that raises the appeal of the startup's growth story - has become the buzzword.
The spotlight keeps shifting. First it was Flipkart, which once had Infosys-beating valuations...before they were revised down more than 60%. Today, it's Paytm hogging the limelight.
With the startup fever, a whole new jargon has come into effect. Data integral to a sustainable business - profits, leverage, return on capital, cash flow - have become old fashioned. Fancy metrics like app installations, gross merchandise value, number of users - any creative term that raises the appeal of the startup's growth story - has become the buzzword.
Loss-Making Unicorns
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The story gets stretched till you're conditioned to believe in the fancy metrics...which are then used to justify high valuations. For startups that can get this far, next comes the public listing.
The original investors, who invested in the story, find a decent exit. Thus
enters the individual investor, scrambling for a piece of the presumed holy
grail...hoping to ride the 'future Infosys or Apple'...
Only to realise that he might be stuck with a company that is yet to establish a sustainable business model.
Only to realise that he might be stuck with a company that is yet to establish a sustainable business model.
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