India needs more profitable unicorns: Ashish Sharma

India's unicorn stable needs more startups that can strike a balance between growth and profitability, the managing partner at InnoVen Capital writes

Last Updated: Sep 23, 2022, 14:40 IST4 min

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Availability of private capital (and lots of it) gave founders an option to continuously raise capital and stay private for a much longer time Illustration: Sameer Pawar

Don’t all big companies need to invest before they can be profitable?

Yes, it’s true that going after large addressable markets requires upfront investments but it’s also true that world-class companies can achieve profitability in a reasonable time. While ‘one size fits all’ cannot be applied to all sectors, founders and investors must take a nuanced approach considering the size of the prize (market), ability of the business to monetise, lifetime value of the customers, ability to cross-sell, customer’s ability to pay, competitive dynamics etc.

GE’s legendary CEO Jack Welch once reminded his managers that “Control your own destiny or someone else will," and the same lesson holds true for founders.

Most founders start with a frugal mindset, but some change along the way, often due to unrealistic investor expectations or peer pressure. There is nothing wrong about raising a lot of capital at high valuations. It’s also acceptable that some early-stage investors, founders, and employees get nice returns before a company turns profitable. However, just optimising for the next capital raise and valuation, with no credible path to profitability, will lead to a situation where all it takes is one failed fundraise and you don’t control your own destiny.

“With great power comes great responsibility"

The Indian venture ecosystem has grown impressively, and there is a lot to cheer about—the innovation, entrepreneurial spirit, and big ideas. With 100+ unicorns and a few public companies, where millions of retail investors have reposed their faith, it’s important that we see the emergence of more enduring and sustainable business models coming out of India. This will then ensure that entrepreneurs get supported by private capital, and all stakeholders (founders, employees, investors) generate healthy long-term returns, thereby keeping the flywheel in motion. I am optimistic that we will see some great entrepreneurs build world-class businesses out of India.

The author is managing partner at InnoVen Capital, India’s biggest venture debt fund

India needs more profitable unicorns: Ashish Sharma

India's unicorn stable needs more startups that can strike a balance between growth and profitability, the managing partner at InnoVen Capital writes

Don’t all big companies need to invest before they can be profitable?

“With great power comes great responsibility"

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