Startups: Focus back on fundamental; profitability and not subsidy.
Will write this so that I can look back in the future.
If we have no idea how it works, then that is not an investment
I have been investing for the last 24 years I think. I started buying unit trust way back in 2020. Haha. I continue to be invested in the stock market and the amount remain substantial. I do NOT look at my stocks every minute, hour and day. Call me lazy, call me busy or even just say I know what I am reallying buying into. I also have no cryptocurrency. I do not understand it enough.
How to understand start-ups?
Today, we talk about start-ups. You know, the ones with super high valuations?The ones they call “unicorns”? Ever higher valuations and yet not profitable even after over 5 years? The ones where new investors pump ever money and pushing the valuation ever higher? Well, if you notice recently, even the profitable ones are announcing their retrenchment plans yeah. Theese profitable ones grew their headcounts too fast or they were just too optimistic with their future and thus overhired.
Cannot keep losing money and more money kept coming in yeah
The ones which continue to run losses have already started letting people go for some time now. Go google yeah. By the way, I do not sway here and there. My views about startups which are just simply having ever higher valuations? I wrote this article in June 2017. Internet stocks? However high, watch for profitability, first Too many people were too crazy with investing into these startups which has suddenly become big.
It’s about what you do and not how much money you have to keep subsidizing!
Companies must focus on becoming profitable. Not keep subsidizing and subsidizing and then saying that they are having higher market shares! They hope that their competitors would die and then they can start charging higher. Hey, focus on providing better service and NOT attracting people with just lower prices because your investor has deep pockets to keep subsidizing…
I wrote another article in Dec 2020. I wonder if one day people would realise valuation on startups (after 5 years) should be based on profits…? I reiterated that startups must focus on profitability. I do not care if you agree with me or not yeah.
A responsible CEO builds the company, not kept pushing numbers to get higher valuations!
Of course, these days, many executives are forced to do that same modus operandi. Push up market shares, show the potential of the company (never mind if all the new business came in because of subsidies…). Chances are there would be some investors looking for higher returns and they may just invest their money because they believe in the near future, someone would buy their shares for more money. The cycle continues until the company really turns profitable or collapses.
If a start-up cannot be profitable because of the service or the product alone, then this is NOT healthy
Company B: They launched promotion. We must quickly launch a promotion and we must make the promotion more attractive to attract buyers.
Company A: It seems that they are launching a counter promotion to counter our promotion. Their deal is more attractive, let’s do a better one then them. Throw in some freebies!
Company B: Oh dear, they are throwing in freebies! We need better freebies than them. Add in some extra giveaways too.
These continue and people say it benefits the consumers. Sorry yeah, it does NOT benefit consumers because the subsidy which went into these could have been invested into proper companies instead which could have created more jobs, could have pushed economic multipliers and many more. However, when it goes into subsidies, it benefits that small group of people until the company goes bankrupt and now the whole market collapses.
Am I the minority? I think so
They say election is won when the majority has spoken. Just remember that even in the salary range statistics, a small number earns many times more than the majority of everyone in the country. Majority of all companies could be earning profits but only a small number may earn extraordinary profits. I have no issues at all to be a minority yeah. Oh yeah… this is what Warren Buffet said, “Risk comes from not knowing what you are doing.”
Happy investing and all the best.
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