What does this actually mean for the nation? A dozen of enduring tech business entities in the near future or might be in a decade or so, reaching a market value of over $50 billion and more and creating a business which would make global impact. Or it would be another 100 more startups reaching the unicorn status in the present model. The model is growth at all costs. There are various modes of business growth but the current startup mode beats most of the successful business models hollow. This model can last only in the strongest of the bull markets and under most favorable conditions. As they say the party cannot go on forever. Bull runs cannot run for all times. It would finally hit the hot tin roof, as there is no limitless capital to fund indefinitely losing business entities.
No one is ready to make a strict business viability analysis of this whole pack and thousands who are not on the same spree are waiting for their time to come. With designer models of valuation in place, anything is possible in today’s world. If value creation does not become the core business principle, working on a clear-cut business plan, pivoting as and when required to reach the goal, the company’s existence would continue to remain precarious. The original garage company flavor seems to have mostly gone off forever. For one Nithin Kamath of Zerodha there are hundreds who are just on the spree of burning cash. *Can unviable business models deliver is the core question?* Do we have the courage to accept and get it into a correctional mode?
The control over decision making is the key? How much of this is lost in the private equity boom, so to say? Can early funding help the founders to achieve their dreams? Is it funding at any cost? Today getting funding itself is the main success criteria of a startup, that it has arrived. Now we have such a startup culture supported by an ecosystem, which has become a madhouse. How big you want your startup to become and what is the gestation period, is a call one has to take! We have advertisement and promotion expenses, more than the revenue earned for years together. Even more interesting is; ”the firm paying the customer more than the revenue the customer is generating for the firm.” Is there a threshold at which right pricing and cost management should start?
The crux of the problem also emanates from the fact that the startups and VCs both think of making money for themselves before anything else. Zomato’s pre IPO buzz was to raise in the range of $1.1 billion, with the current balance sheet showing current revenue only slightly better than the current losses. The most intriguing part is what gives startups the confidence not to bother about profitability. The entrepreneurial dream of changing the world seems to have evaporated. Valuation has taken precedence over everything. Kawa Swisher calls it as ”assisted living for millennials “ and Keven Roose calls it ”Millennial Lifestyle Subsidy.” Tragically, ”if a listed company were to chalk up such colossal losses as unicorns do, they would get indicted-in the court of shareholders as well as in the court of law.”
STARTUPS ARE A NEW BUSINESS MODEL IN THE MAKING OR A BUSINESS MODEL GONE ASTRAY.