Date: 5th September 2019
Column name & Page No: STARTUPedia: pg- 26
Cash. Because they grew too fast and ran out of cash OR Because they didn’t get cash in the first place.
We’ve heard of many stories right? Of how the product was way ahead of its time. Of how the market had difficulty in accepting the product. Of how the a better company executed faster. etc etc. Of how the quality of revenue wasn’t great or how the margins were too slim. But the truth is this. We need capital. And we need that capital to make us profitable. Just that.
Look at the large companies that attracted huge amounts of capital. It took Amazon 10 years to record its first profitable year, with a capital raise of $108 mn. Airbnb did it faster (8years) with a $4.4 bn raise. The point is this — capital allows you to make mistakes. It allows you to scale quickly and bother about quality later. It allows you to take that time to work on improving the quality of revenue. And the best is, you become big. And the entire world of ‘network effect’ comes into play. The world cannot refuse your margins, in fact the best players like booking.com actually reduce margins because they have the volume.
Hence Cash. Too simplistic?
Originally Published on New Indian Express