Should We Allow IPOs of Loss Making Startups?
A slew of Initial Public Offers (IPO) are up round the corner. Zomato’s IPO has just ended today, while Paytm is next. Thereafter, MobiKwik’s IPO will come this year. These are all Tech Startups. What is common between most Startups? They all make losses year after year. Their business model is based on "cash burning" to gain new customers, in order to increase valuation. These companies have survived only by getting new VC money every now and then. As soon as such companies stop getting new VC money, they wind up pretty fast. Remember 'Taxi For Sure' which closed down as it could not get new round of VC fund? It is the same story for most of the startups. Some more data to support my point: Food delivery app Zomato’s standalone losses widened 160% to Rs 2,451 crore in the fiscal year ended March 31, 2020, regulatory filings sourced by business intelligence platform Tofler showed. ( Source: ET ) One97 Communications Ltd, which is the parent company of Paytm, posted...