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: (click to read)
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.
Please remember that all these so-called disruptors must be offering a superior service. It could not be exact same service abut offered at almost free (because they have lots of new funds from investors) With all these continuous subsidizing, of course 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 edited 12 Jan 2020.
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