The much more mature US market has witnessed many such IPOs. Palantir,
\nSnowflake, Airbnb and DoorDash were the big tech IPOs of 2020 and all are lossmaking entities. Yet, each one had a blockbuster debut on the markets. Airbnb had
\na $3.5 billion IPO in December 2020 and it quickly crossed the $100 billion market
\ncap mark on listing. Similarly, DoorDash had a $3.4 billion IPO and galloped to a
\nmarket cap of about $59 billion on listing.<\/p>\n
CHANGING THE ASSESSMENT LENS<\/strong><\/p>\n For traditional companies, an IPO is typically a culmination. It has grown and In the case of tech startups, the assessment needs to be on potential future A tech startup focuses on first growing the user base, then ensuring increased THE AMAZON MODEL<\/strong><\/p>\n Amazon is considered to be the pioneer of the model of going public during the loss-making growth phase and continuing to aggressively invest in growth. Famously, Harvard Business Review had said in a 2013 article that Amazon <\/strong>had \u201ctrained its investors to behave\u201d.<\/strong><\/p>\n In fact, it wasn\u2019t until 2016, almost 10 years after listing, that Amazon started AMAZON’S NET INCOME BY YEAR<\/strong><\/p>\n RESULT MATTERS<\/strong><\/p>\n The important lesson from the Amazon model is not that investors need to repose AN IMPORTANT QUESTION TO ASK IS – DOES THE VALUATION AT IPO MATCH WITH THE LONG-TERM PROSPECTS OF THE COMPANY?<\/strong><\/p>\n Unless you are sure the stock will list at a significant premium and will ensure good short term returns, you are looking at a long term play. For long-term value building in the public markets, the company needs to show performance and that can happen only if the company significantly scales and delivers results. So, profitability and customers remains the key.<\/p>\n Having said that, I do think that investors and the markets are very agile; and it will be sooner rather than later that they adapt to the new way of evaluation. Using some of the metrics outlined earlier one should be able to differentiate between the wheat and chaff. Lastly, patience is a difficult pill to swallow but one that helps build the best financial muscle.<\/p>\n After all, according to Jeff Bezos\u2019 2020 Letter to Shareholders, Amazon created As India is emerging from a gut-wrenching second wave of the Covid-19 pandemic, the optimistic financial markets point to a hope of growth post-pandemic. Linked to this is the expected flurry of tech startup IPOs in 2021 in India — tech startups are expected to mop up approximately $20 billion this year by going public. This is the year when India’s storied Unicorns are expected to start transitioning into public companies. Zomato is already off the block and has filed its draft papers with Sebi for a whopping INR 8,250 crore or $1.1 billion IPO. Paytm is said to be […]<\/p>\n","protected":false},"author":4,"featured_media":1528,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"categories":[41],"tags":[59,53,55,51,52,57,58,48,46,47],"authors":[{"term_id":153,"user_id":0,"is_guest":1,"slug":"team-trica","display_name":"Team Trica"}],"_links":{"self":[{"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/posts\/1603"}],"collection":[{"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/comments?post=1603"}],"version-history":[{"count":5,"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/posts\/1603\/revisions"}],"predecessor-version":[{"id":1797,"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/posts\/1603\/revisions\/1797"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/media\/1528"}],"wp:attachment":[{"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/media?parent=1603"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/categories?post=1603"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/trica.co\/capital\/blog\/wp-json\/wp\/v2\/tags?post=1603"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nreached stability and then goes public. In the case of tech startups, the IPO is a
\npart of the growth journey. For such companies becoming a Unicorn is the 1st day
\nlunch session of a five-day test match and IPO is at best the second day\u2019s session.
\nFor traditional tech and non-tech businesses, investors primarily assess a
\ncompany\u2019s current performance, with a focus on earnings and earnings multiples.<\/p>\n
\nperformance based on investments. As an investor, I would focus on two things <\/strong>for tech startups going IPO \u2014 path to profitability and exponential customer <\/strong>growth.<\/strong><\/p>\n
\nusage and stickiness and only then on monetising. Food delivery and e-commerce
\nstartups did not apply delivery charges initially. Only once they had a sizeable user
\nbase and the service they offered became essential to that user base did they start
\nmonetising by charging delivery charges, among other measures. This does not
\nmean that such startups need to be given the benefit of doubt always.
\nPerformance is important.<\/p>\n![\"\"](\"https:\/\/capital-blog.trica.co\/wp-content\/uploads\/2022\/04\/VA1.png\")
<\/p>\n
\nmaking significant profits. But Amazon was growing rapidly, it was increasing its
\nusers, investing in new categories, acquiring companies, launching innovative
\nofferings and products for consumers. Amazon\u2019s blockbuster innovations like
\nPrime, AWS and Alexa all happened much after its public listing. The stock prices
\nkept pace with Amazon\u2019s top line growth. As of January 2021, Amazon\u2019s share price had grown almost 12,040% since its IPO.<\/p>\n![\"\"](\"https:\/\/capital-blog.trica.co\/wp-content\/uploads\/2022\/04\/VA2.png\")
<\/p>\n
\nfaith blindly in tech startups. It is that fast-growing, loss-making companies need
\nto show results in the form of exponential growth, when not making profits. In the
\nIndian context, the ability to make inroads into non-metro India will be key to the
\nsuccess of Indian B2C tech startups.
\nIt is important to also focus on the performance of the IPOs. In the last decade,
\nonly 20% of the companies listed on the Indian stock exchange have outperformed
\nthe benchmark indices. This shows clearly how important it is for investors to do
\ntheir due diligence and not follow market euphoria blindly \u2014 whether the
\ncompany is a tech startup or not.<\/p>\n![\"\"](\"https:\/\/capital-blog.trica.co\/wp-content\/uploads\/2022\/04\/VA3.png\")
<\/p>\n
\n$1.6 trillion of wealth for share owners and it did record a profit of $26.9 billion
\nbetween April 2020 and March 31, 2021<\/p>\n![\"\"](\"https:\/\/capital-blog.trica.co\/wp-content\/uploads\/2022\/04\/small-line-1.png\")
<\/p>\n","protected":false},"excerpt":{"rendered":"