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After a small lull, funding is back
for start-ups. Big mergers, new unicorn, million dollar seed funds are back. But
another thing which has not changed is the fact that almost all the funded
start-ups and new company registration are still far away from being
profitable. Hundreds of Billions have been spent in funding, start-ups have
access to all the technology, resources and funds but still bottom line remains
elusive. What can be the reason for the same?
Through this article we will try to
discuss the reasons why funded company registrations are unable to make
shoring up Top Line:
There is constant pressure from investors to continuously raking up the Top
Line. Valuations, which is the only thing of interest for investors, are top
line and they do not want to compromise on it. Hence discounts, cash backs etc
has become a norm and profits are still elusive.
No company wants to allow competitor to gain market share at their cost and
hence no one wants to compromise on top line to manage their profitability. No
one wants to bell the cat first!
High cost of
you see any funded company registration, you will find that there is no control
on operations cost. Highly paid resources doing mundane job, i-phones for every
team member, resort outing. This is for company registration who are almost
‘burning’ as much cash or less than what they are generating in revenue
about Bottom Line: ‘Burn’
has become part of regular lexicon in any new company registration which is
funded. Founders to key personnel, they all use the term ‘Burn the cash’ very
freely. But if you ask any top level executive or founder of any funded company
registration about what is their plan to profitability, they will be clueless.
What is the critical mass which will ensure that they have enough economy of
scale to break even? Well, with million rides a week. Ola and Uber still loses
about 150 Crore a day!!
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