Profitability means profit after tax (PAT), and for us, there is no such thing as "adjusted," said Oxyzo and OfBusiness co-founder Ruchi Kalra at the Moneycontrol Startup Conclave.
“For us, the one metric we always focused on was profitability,” said Kalra, who co-founded two of the rare profitable unicorns: Oxyzo, a lending platform for small businesses, and OfBusiness, a business-to-business marketplace for industrial materials.
“Profitability is always PAT. That is profit after tax. For us, there is nothing like profit adjusted for ESOP (employee stock option programme) costs, adjusted for depreciation and so on and so forth,” she added.
Her comments come at a time when a number of unicorns, including listed companies like Zomato and Paytm, and even private startups, have resorted to reporting adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation), adjusted profitability, and in some cases, even adjusted revenue numbers. This follows a growing emphasis on demonstrating a stronger bottom line over the past 15 months, amid an extended funding winter.
Many unicorns have also been reporting numbers adjusted for ESOP costs, which is a major cost for most technology startups as it acts as a great incentive to hire talent without hitting the company’s cash flow.
With funding to India's startup ecosystem dropping, startups have also resorted to several cost-cutting initiatives. One area where startups have substantially reduced spending is marketing and sales costs. However, Kalra asserted that Oxyzo and OfBusiness have always optimised cost structures.
“I always believe in sales before marketing and tech is always the focus. We proudly say that 90 percent of the tech we developed in the first three years of our business is what we use now,” Kalra said.
Kalra also said that generating cash in B2B business models is easier, taking a contrarian view as many venture capital firms do not consider it an attractive business model. Sample this: India, the world's third-largest unicorn ecosystem with over 105 unicorns, has only five B2B marketplace unicorns.
“Lending business has to be a PAT-positive business from day one,” said Kalra.
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