BLEEDING STARTUPS OR COMING UP OF A NEW BUSINESS MODEL?
Are the days of financial discipline over? Does a profit and loss statement mean anything? Are Start-Ups a microcosm of the big company or a different animal in themselves? Is the original garage company, HP model of a new age IT enterprise, is up in flames? Garage was the depiction of a dream and inner conviction of the entrepreneur to make it happen. Most of the great companies today have come from that fold. Can the gestation period literally be wound up with influx of funds, that is what seems to the running thought process? Tesla has taken 17 years to reach wherever it has and a ride which can put even the best of Hollywood horror movies to shame.
Earlier the battle was of creating an enduring enterprise, whatever might be the level of perseverance, required for whatever length in time. As if the success was scripted the time unknown and also the quantum of hardship, stress and journey to the brink of bankruptcy. The current age of start-ups seems to be writing a new business script, a model unproven and a valuation unknown. The valuation has become a game. Where the bankers would throw their hands up, the new age investors are ready to invest their money on ideas, which as per their evaluation would succeed. Very rarely it does. Are they in any gamble game? Or is it just an arm twisting investment, with control of the company moving in a different direction.
Does all this dilute the purity of the original idea itself, because the operation becomes as mercenary as ever to start with. The money invested for customer acquisition, business development and marketing speak a different story. It gives a feeling that they were born to bleed. Most of the companies are into the prevalent aggregating App success story. The dream of creating creative monopolies cannot be a simple dream. Every time a different story is given to defend the ever-bleeding start-ups. The current story is, ”the volatility in the market amid rising geopolitical tensions and the ongoing pandemic has dented the growth of start-ups.” Even the top start-ups are money guzzling machines. What is called business success in the pumped up Start-Up regime, is yet to be unravelled.
As it stands today, OYO Rooms has incurred losses to the tune of Rs.3493.84 crores in FY 20-21, Swiggy reported a loss of Rs.1,314 crores and MobiKwik’s net loss was Rs.111.3 crores. The game changer Paytm is operating at a loss of Rs.778.5 crores, PB Fintech lost Rs.298 crores, Zomato runs at a loss of Rs.63.2 crores while CarTrade is into Rs.23.4 crores loss. Business for loss is the new name of the game. The losses don’t lead to cutting of operating costs. It does not lead to job losses. The start-up investor fraternity seems to be ever bullish on the investment. The valuations increase and so does the funding. The company’s credibility, reputation and trust remain intact. We are still to see these businesses going way beyond touching the Unicorn mark, how they perform on the touchstone of hardcore business and create enduring and transformational business companies only time will tell.
CAN BLEEDING STARTUPS DELIVER THE NATION’S STARTUP DREAM OF DOUBLING OUR ECONOMY?