Byjuโs. Ola. Oyo. Swiggy- Why have investors slashed their valuations like crazy? ๐๐
Why should this be taken seriously? And why were they valued so high before?
Hereโs why these questions deserve more attention! ๐
๐ @BYJUS
Before: $22.5bn
Now (As per Prosus): $5.9bn
Now(BlackRock): $11.5bn
Cut down twice.
๐ @Swiggy
Jan 22: $10.7bn
Now (Invesco): $5.5bn
Cut down twice.
๐ @Olacabs
Before: $7.4bn
Now (Vanguard): $4.8bn
Cut down thrice.
๐ @oyorooms
Before: $10bn
Now (Softbank): $2.7bn
But, why should these be taken seriously?
๐ SoftBank Group Corp. is $60bn Japanese tech giant operating 2 Vision Funds cumulatively holding startup assets worth ~$130bn
๐ BlackRock is the worldโs largest investment firm managing assets (AUM) of $8.6 Trillion- 3x Indian GDP!
๐ Invesco is also a global asset manager with AUM of $1.5 Trillion- A little over half of Indian GDP!
๐ Prosus is meanwhile a tech investor, with assets worth $170bn!
Each of these long-term investors are listed companies with shareholders to keep happy- Or their own share price falls!
They have every reason to show that their investments are doing well.
And yet they are slashing their valuations again & again. What does that say?
๐ That they can no longer justify those lofty blue moon โclaimedโ valuations ๐๐
๐ And, if the worldโs biggest listed investors can no longer do that, then are these startups really that big at all?
That raises the question:
How were these companies valued so much anyway?
Invesco says:
๐ Valuations are determined using SIGNIFICANT UNOBSERVABLE INPUTS
๐ When observable inputs are unavailable (when there is little or no market activity), unobservable inputs are used
Now, what does that mean in layman's terms?
Storytelling & Vision.
Say, a guy runs a Kirana shop that does Rs 5cr revenues per year, they could get a valuation of maybe Rs 10cr.
Now, read this:
๐ Scaled a Kirana shop to Rs 5cr sales, growing 30% annually
๐ Aiming to build 50 such outlets across Delhi NCR to grow sales
๐ Will offer not just Kirana stuff with private labels, but to also offer concierge services to gain a bigger share of customerโs wallet
Iโm not suggesting that this is an idea thatโll get funded. What I am suggesting is this ๐
๐ VCs, angels or startup investors are not in the biz of betting on businesses
๐ They PRIMARILY bet on a founder & his vision. Those are the unobservable inputs
About the above-mentioned startups:
With successive rounds, the founder's storytelling & vision got more convincing & audacious backed by solid execution since the previous round was raised.
Can we put an end to the #FakeNews that Byjuโs is raising $1bn at $22bn valuation!? ๐๐
Break the numbers shared below the headlines, and the beans spill out!
The truth ๐
$1bn is what Byju's is reportedly chasing. Though visibility in the media is all about $950m.
This sum can be broken down into 2 parts ๐
1๏ธโฃ A 3yr $250m convertible debt from Davidson Kempner Capital Management (DKCM) which is not known to invest in startups, but in financially distressed companies against significant equity & big interest rates
The company released its Q4FY23 results some days back. So, I dived in & sliced through its numbers for the last 16 qtrs.
Here is all that I learned ๐
In last 4yrs:
๐ย Revenue/month: Rs 85cr | Up ~90%
๐ Profit/month: Rs 25cr | Up ~278%
Just look at those numbers!
How did it happen?
Outstanding jump in paying subscribers:
๐ 72% up in the Top-8 cities (~1.1L users)- 20% up in last 1yr alone
๐ 62% up in the cities with >5L people (~53k users)- 25% up in last 1yr alone
An avg #Rapido rider does ~3 trips a day, earning just Rs 200! ๐ฎ๐ฎ
Whatโs his persona & motivation? What does @rapidobikeapp earn out of it?
Hereโs all that the companyโs data reveals! A thread ๐
This morning, @livemint published a great data-rich story on #Rapido by @sumantbanerji. What did it show? A lot of things. But some key numbers are all that probably matters.