Evaluating New Age Startups: Profitability Vs Growth
Evaluating New Age Startups: Profitability Vs Growth
The presentation explores the dichotomy between growth v/s profitability for early stage startups. Should startups chase growth at all costs (postponing profits to a future date), or focus on achieving immediate breakeven while striving for growing their business topline. This equation is examined from various standpoints - risk vs rewards, startup valuations, venture capital powerlaw, stage of startup evolution etc.
Evaluating New Age Startups: Profitability Vs Growth
@amitranjan3 months ago
Evaluating New Age Startups:
Profitability Vs Growth
- · Traditional finance (debt) ruled out
- · Enter Venture capital
- · Large TAM
- · Rapidly shifting user behavior -new habits, repeat usage
- · Fast growth / distribution
- · Command pricing power
- · Focus on PMF
- · Cash Burn funds Growth
- · Early Monetization Experiments
- · Growth over Profits!
- · Achieve Networks Effects
- · Revenue Lines Emerge
- · LTV > CAC
- · +ve Unit Economics
- · EBITDA +ve
- · Stable Product
- · Established Revenue Lines
- · Profitable, Generating Cash
- · Financial Budgets & Forecasting
- · Defensible competitive advantage
- · Less competitive, no offline equivalent
- · High Gross Margin
- · SAAS, Social Networks, CoreTech
- · Digital equivalent of offline process
- · Competes with offline, omnichannel
- · Low competitive advantage
- · Low Gross Margin, No/low pricing power
- · Ecommerce, Marketplaces, Payments
- · Post 2008 QE, Easy liquidity -> Hot Money into Assets
- · Mismatch b/w Public vs Private Market Valuations
- · Few IPOs look premature, ahead of time
- · Markets will resolve this eventually, correction is due
- · http://www.paulgraham.com/growth.html
- · https://www.nfx.com/post/new-rules-growth-profitability/
- · https://fabricegrinda.com/playing-with-unicorns-episode-3-how-vcs-evaluate-startups/
- · https://tradebrains.in/upcoming-ipos-indian-startups-2021/
- · https://www.youtube.com/watch?v=cvaDvnp2USA
- · https://timesofindia.indiatimes.com/business/india-business/ipo-listings-see-rs-2-lakh-crore-erosion-techstartups-account-for-half/articleshow/89103838.cms
Startups = Growth
'A startup is a company designed to grow fast'
Paul Graham - YCombinator
Startups are Risky: Most Die, Few Change the World
Venture Capital Model -Power Law
Returns don't follow Normal Distribution, Skewed towards Outliers

Large Outcomes (100X) Imply
Growth v/s Profits is a Constant Balancing Act

Depends also on business types -Ecommerce v/s Marketplaces v/s Social Networks v/s SAAS v/s CoreTech
The Startup Glide Path Framework

Early Stage
(Seed -Series A)
Mid Stage
(Series B -Series D)
Late Stage
(Series E -IPO)
Indian Tech Startup IPOs Q1'22 Crash??


Startups Business Models -Diff Types
Experiential / Platforms
Transactional
Problem is Valuation, Not Growth vs Profits
Credits
https://twitter.com/amitranjan
https://webyantra.com


Thank You...
https://twitter.com/amitranjan
https://webyantra.com













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