Bengaluru: 2024 is shaping up to be a pivotal year for the startup ecosystem, with a new wave of start-ups gearing up for their debut on the exchanges. As the excitement builds for these upcoming IPOs, it’s worth taking a look back at the earlier wave of consumer internet firms that made their mark on the bourses.
One standout from this earlier wave is Zomato Ltd, a company that has evolved from a restaurant ratings platform to a food delivery and quick commerce giant. In the fourth quarter of 2023-24, Zomato reported a consolidated net profit of ₹175 crore, marking a significant 27% sequential growth over the previous quarter. This growth in profitability, coupled with a revenue growth of 8.3%, indicates that Zomato is unlocking the levers of profitability.
These developments are not just significant for Zomato, but for the entire venture capital-funded start-up ecosystem. The success of Zomato highlights some important lessons for start-ups looking to make their mark in the market.
One key lesson is the importance of focusing on building a profitable core business. Start-ups that rely on the promise of upselling and cross-selling to their user base often find themselves struggling to make money with their core product or service. The myth of extensive data mining and analytics as a solution for profitability is debunked, as companies like DMart continue to thrive by understanding their customers’ needs and delivering value.
Another important lesson is the danger of over-indexing on technology at the expense of a strong value proposition. Start-ups that prioritize technology over a clear understanding of their target market and customer needs can find themselves on shaky ground when it comes to profitability.
The story of Zomato’s success serves as a reminder that building a profitable company takes time and a relentless focus on execution. As the start-up ecosystem continues to evolve, the true test of strength lies in the ability to justify and defend a valuation in the long term, while delivering returns to shareholders at every stage.
As start-ups gear up for their IPOs in 2024, the challenges of building large and profitable companies will only continue to multiply. While the path may be uncertain and fraught with challenges, the success of companies like Zomato serves as a beacon of hope for aspiring entrepreneurs in the start-up ecosystem.
In conclusion, the journey of building a successful start-up is not easy, but with the right focus, execution, and a clear understanding of customer needs, companies can navigate the challenges and emerge as winners in the competitive market landscape.