From Airbnb to WeWork, the pandemic has rather embarrassingly revealed that when it comes to many growth-at-all-costs-orientated startups, the emperor has no clothes. But is this going to have an impact on how future funding is applied? I provided commentary for Verdict Magazine on this topic which you can read below.
Aman Behzad, managing partner at corporate finance advisory firm Royal Park Partners, for example, argues that while “revenue generation and growth” remains an unchanged focus, “the timescales with which investors expect to see evidence of eventual profitability” have shifted. “For a startup, profitability is traditionally a medium-to-long term goal (four or five years from inception),” he says. “There is an increasing drive, however, to see profitability from year three, and sometimes even earlier. And whilst it is typically not necessary to generate actual profitability, demonstrating the ability to do so eventually is key. “Growth and profitability are two sides of the same coin and the balance shifts over time.” “This means startups that want to thrive need to place a sharper focus on strong, demonstrable unit economics sooner, rather than kicking it into the long grass as many have a tendency to do.”