Published on 28th February, 2023
In the post-covid world, conversations in and around start-ups have increased exponentially. Shark Tank India has evolved into a good watch for family dinners, which is an upgrade over daily soaps, but nothing is ever that simple, is it? With retail investors grappling with the volatility of IPOs, the viability of start-ups has become a cause for concern.
Start-ups often pour substantial amounts of their funding into marketing and advertising, with the hope of boosting sales. However, this strategy only works if it aligns with the product's life cycle, takes into account the return on advertising spending (ROAS),and considers customer satisfaction.
A well-known start-up, relies heavily on digital creators and social media influencers for marketing. While this has proven to be an effective strategy given the amount of content consumed by netizens, its ROAS lags that of Nykaa and Hindustan Unilever.
The pursuit of short-term gains through advertising can be tempting for start-ups, but it is important to ensure that the growth is sustainable. To achieve this, start-ups must focus on providing high-quality products and services that meet customer expectations.
The case of Byju's, which has faced criticism for aggressive sales tactics and coercing customers into unaffordable loans, serves as a cautionary tale. Such practices may bring in revenue in the short-term, but they erode customer trust and harm the company's reputation in the long run.
The recent downfall of GoMechanic and Trell is a prime example of the importance of due diligence and sustainability reporting in the start-up world.
A Bengaluru-based start-up that was last valued at $300 million following a funding round in January 2021, is now in free fall following revelations that it inflated its revenue numbers to secure a new round of funding. The start-up has already laid off 70% of its workforce and faces a bleak and uncertain future.
An influencer-led video-commerce platform, had their $100 million fundraising round halted due to emerging allegations of financial misappropriation. According to additional reports, influencers working with Trell raised a few complaints about the non-payment of dues for work performed.
These incidents underscore the need for investors to be vigilant and invest in companies that prioritise ethical business practises and long-term sustainability. Founders, on the other hand, must broaden their vision beyond growth to include responsibilities to their stakeholders.
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