Not show profit and still a true business? For how long? 

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This article is aimed at huge names outside this region which is still losing money by focusing on market share, gaining them mostly through ‘spending.’ I think my tolerance level is pretty high for startups. I think they must be given time to grow and to start showing good promise which is a clear direction towards profitability. Perhaps 5-8 years, max? I mean, if I am starting a new restaurant, if it does not work, I will have to close it within 12 months. This is the same for most other small businesses. Anything that does not work has better be stopped so that it does not keep absorbing more funds, spending them and then report a loss. I do not believe any start-up should still be getting ever more money and incurring ever continuous losses year after year. In Chinese, ‘where do you want to keep your face?’ This is especially those which has been around like forever. One year in the internet world is equivalent to a minimum of 5 years in the traditional business world. Anyway, this is the actual statement that prompted me to write this article: “What a difference 17 years makes. In this day and age, companies can still not show a profit, but they have a true business,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. Full article in TheStar here: 

I would not say I disagree with the statement but there are definitely way too many of these famous startups which continue to raise ever more fund and expand to ever more markets and all the while trying to kill all the local competition simply because they have more funds to spend. The local competitors? Well, most of the time, they are not really doing that well because of bad service for example. However, competition should be based on providing really good service and NOT through subsidies where there is just no way for the local competition to fight back because they could not do so at a loss. The new startups with lots of cash in hand? Yeah, they could. By the way, please do not compare newer startups with a really good service versus those over 8 years and STILL getting more funds because they just could not return a profit yet. They are still selling a ‘story.’ Investors continue to believe them.

I remember when MyTeksi started in Malaysia. I like them because the promise was all about better service. You know well in advance what’s your fare and you know who’s coming to pick you up. There’s no way anyone could overcharge you which was the reason why people hated the taxi service anyway. In short, I downloaded the app and started using it. These days however, the competition is such that for some days, some areas and some rides, the total fare charged is just unbelievably low. For example, as low as FREE rides. My friend, the one who owns two condos nearby KLCC has taken such free rides a few times! Think… the driver cannot drive you for free, even if it is a short distance. He also could not drive you for a few ringgit because there’s just no way that he could pay for his car maintenance. So his ’employer’ would have to pay him some incentives. This is why becoming profitable is hard. Competitors are trying to kill one another and everything boils down to who has more money. I know this is how startups grow, right? Here’s one nice article that sums up my view. Happy investing in one.

written on 23 July 2017

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