[V.Narayan]

Unacademy is Unsustainable Business not Understanable

https://inc42.com/buzz/unacademys-fy...igher-revenue/

https://twitter.com/upadhyay_harsh1/...GfJtGAkiVbajBA

RANT starts

Is this a business or a charity or a ponzi scheme? Am I the only one utterly baffled. This is what comes from too much slush money being legitimized through global private equity firm (PE) chasing entrepreneurs with the hope of exiting fast enough and tossing the baby onto some other PE's lap.

For those who do not wish to traumatize their brain by reading through these links I have attached a screen shot below of the CEOs tweet on his numbers. These PEs are not trying to build a sustainable business. All they are trying is to market the value of the Dutch Tulip up so that some other sucker buys it. That is all. How can PE fund managers, most of whom never built a business ever guide or mentor entrepreneurs? That is why their mantra is lever up i.e. take on debt, acquire aggressively, organic or inorganic, build the market share and then I exit and you figure it out thereafter.

I feel sorry for the employees.

This is in my ranting opinion a waste of capital that might have been better deployed elsewhere to generate employment, GDP and taxes in a cogent sustainable fashion.

RANT over

[SmartCat]

Originally Posted by V.Narayan

I feel sorry for the employees. This is in my ranting opinion a waste of capital that might have been better deployed elsewhere to generate employment, GDP and taxes in a cogent sustainable fashion.

Why employees? Going by the expenses column, employees/educators/advertisement agencies are doing well for themselves. It is fine to feel sorry for the last investors (probably IPO investors) who are left holding the bag. But perhaps not either, because what got them invested into such companies in the first place was outright greed.

So Aal Izz Well!

Deserving startups are getting capital, as a byproduct of this PE boom cycle. The number of startups in defense, drone/UAV tech, space technologies etc is astounding.
https://www.theindianwire.com/startu...system-315619/

[ajayc123]

@SmartCat you have an interesting perspective. High employee expenses are generating higher employment, higher income tax for the government. When these guys spend the income generated, it will have multiplier effect on the economy, more taxes collected by the government. Revenue generated by the company generates more taxes. If I compare that to a profitable company, probably they will have fewer employees, leading to lower income taxes, and lower multiplier effect contributions etc.

Startup employees are generally quite smart, I expect they should be able to get another job.

So actually things don’t look that bad.

[Chetan_Rao]

Call me an idiot, but the whole thing these days appears to be debt-shifting musical chairs.

You toss in all you got (and can get) and hope with all you got that you aren't the one standing when the music stops. Doesn't really take much except deep pockets (not even your own if you can sucker someone else in), does it?

There must be a better way to spend and make money. Or maybe there isn't. You know, idiot. *points to self*

[Samurai]

These kind of fund fattened sheeps, I mean fund fattened loss making (FFLM) startups... have one purpose. Sell it to the greater fool (IPO or another PE/VC), and run away with the profits. Unlike a fattened sheep, these startups are full of hot air. If the air leaks before the sale to a greater fool, it can implode and the original PE/VC is stuck with the useless carcass. I don't consider these PE/VC as victims either, because they are doing it with full knowledge of the risk involved. In fact, they do it simultaneously with 10+ startups, and end up coming on top even if 20% of them are sold while fat.

Now, some will say these companies have revenue. Yes, if you spend ₹100 crore and sell the output at ₹25 crore, you will have revenue. But you will also have ₹75 crore loss that someone has to fund. If there is no path to profit in near future, that is not entrepreneurship. Real entrepreneurship is spending less to sell at higher price. If input cost is higher than selling price, and there is no way to reverse it in near future, that is not entrepreneurship. That's just a scam.

Originally Posted by V.Narayan

[b]I feel sorry for the employees.

Originally Posted by SmartCat

Why employees? Going by the expenses column, employees/educators/advertisement agencies are doing well for themselves.

Let's not feel sorry for the employees here, they made a bargain. No one forced them to work for FFLM, and they can leave any time. We have heard enough number of times from employees in other threads, it goes something like "Make hay when sun shines". In fact, I had shared the crazy salaries offered by these fantastic loss making startups. Employees are a major beneficiary of these highly flawed entrepreneurships. In return for the crazy money, these startups will suck your soul. Remember how Byju employees are trained to cheat gullible customers by lying to them about the courses and benefits.

These high paying, highly funded, loss-making startups are like the naked person offering their shirt. As an employee, all you get is the shirt (money). There is no growth, no mentoring, no path to a good career, and constant firefighting. These companies destroy the idea of what means to be an honest professional.



Fortunately, there are plenty of low/no funded startups that have path to profitability in near future. I work closely with some of them. So, there is hope. If there are victims, they are these companies. Their humble wage budgets are totally messed up by FFLM startups that don't really create any value.

[ajayc123]

Originally Posted by SmartCat

But perhaps not either, because what got them invested into such companies in the first place was outright greed.

Tell me who is not greedy, starting from HNIs to the common investors. That is human nature, and also the reason for advancement. We are wired like that.

[LastPanicker]

True victims of this mess are the budding startups who are trying to bootstrap using their savings/borrowings and their employees.
Some of these offer real good value to the market and are profitable at the same time, but finding it hard to survive. As these big bulky PE backed cash burning companies are very good at killing their competitors and creating resource scarcity, it gets tougher for the competition to survive and results in creating a market mono/duopoly which is neither good for the services provider and nor for the consumers in the long run.

Also, it's not just ed-tech domain where this is the case. Following are some more instances that I've read in a last couple of days:
https://entrackr.com/2022/10/lending...cale-grows-24/
https://entrackr.com/2022/10/wakefit...es-spike-2-8x/

[sanjayrozario]

Originally Posted by V.Narayan

Unacademy is Unsustainable Business not Understanable

Classic case of The Greater Fool Theory

Mod Note: Please quote ONLY the relevant bits of a post. Quoting a full, long post inconveniences our mobile readers.

[yashg]

Originally Posted by V.Narayan

Unacademy is Unsustainable Business not Understanable

Capitalist Socialism. That is how I would describe these new age heavily funded startups. They are not in the market to create a long term sustainable business. The whole idea is to multiply the investor money by essentially distributing cash to employees and customers and showing "traction" and eventually, dumping it on the public by means of an IPO or a larger public company with real business. Gone are the days when sustainable businesses were built over generations. Now, entire game has to be played within a span of 7-10 years.

It is still not easy. It takes a lot of blood, sweat and tears to convince investors and winning the race to be the last man standing in the cutthroat market. Those who are able to do it, are really special. It's not everyone's cup of tea.

[Samurai]

Originally Posted by yashg

It is still not easy. It takes a lot of blood, sweat and tears to convince investors and winning the race to be the last man standing in the cutthroat market. Those who are able to do it, are really special. It's not everyone's cup of tea.

You can say the same thing about mafia. There is no justification for doing bad things. Entrepreneurs are supposed to do good, not wreck the industry to make profit for few PE/VC.

Anyway, moving on...

India is now the 5th largest economy, if you just consider countries. However, if we allow California state to join the list, they might beat us to that spot. So we can agree that California very very rich, it is the biggest economy even within USA. Yet, it has 50% of the homeless of USA, and they live in really bad conditions, and are even forced to live in the desert.

This tells us that capitalism doesn't solve poverty. It even creates it.

https://www.youtube.com/watch?v=LzbU-9L1WS4

[neerajku]

For many of these start ups, common sense does not seem to be applicable. They are not making money, most of them bleeding. Many closed, many more struggling. Is it the fear of missing out that keeps them funded? Or good money chasing bad money , no one knows. We have been hearing about this bubble for last 6-7 years but so far only punctured when they went public, not busted yet. May be greater scrutiny yes. But not proliferation. Power of ideas? No one knows. There are also rumours of them being funded by black money of high and mighty. Do they dont care about returns? I am sure such owners also do. But can take greater risks for sure. Fact remains that we are getting 50+ billions USD for several years now, generating jobs, producing demands for goods and services and paying taxes. We should not worry too much about it. It is a business which has still unexplained dimensions. Lookout amazon , took almost 20 years to be profitable, though barely but dominates the markets. That could be the inspiration.

[alpha1]

Originally Posted by yashg

Capitalist Socialism. That is how I would describe these new age heavily funded startups. They are not in the market to create a long term sustainable business. The whole idea is to multiply the investor money by essentially distributing cash to employees and customers and showing "traction" and eventually, dumping it on the public by means of an IPO or a larger public company with real business. Gone are the days when sustainable businesses were built over generations. Now, entire game has to be played within a span of 7-10 years.

It is still not easy. It takes a lot of blood, sweat and tears to convince investors and winning the race to be the last man standing in the cutthroat market. Those who are able to do it, are really special. It's not everyone's cup of tea.

On the contrary, Socialism is what VN ji is leaning towards:

This is in my ranting opinion a waste of capital that might have been better deployed elsewhere to generate employment, GDP and taxes in a cogent sustainable fashion.

What we have in action is pure capitalism, where everyone is thinking just for himself and is being optimistic about making profits in future. Every investor has a different time horizon about optimistic future and therefore an ever-growing valuation.

[yashg]

Originally Posted by alpha1

What we have in action is pure capitalism, where everyone is thinking just for himself and is being optimistic about making profits in future.

I don't believe making profits is on their minds, even in future. Some services are just never going to be profitable, at any scale. The only way investors can make money is by selling the promise of future profits to someone else. Kind of like a Ponzi.

[alpha1]

Originally Posted by yashg

I don't believe making profits is on their minds, even in future. Some services are just never going to be profitable, at any scale. The only way investors can make money is by selling the promise of future profits to someone else. Kind of like a Ponzi.

Profit is profit. Why do you want to meddle (perhaps govt intervention) to define what kind of profit is legit and what is not?

Are you also opposed to transfer of ownership via selling/buying of shareholding? Perhaps then we should also scrap the secondary stock markets.

[DigitalOne]

Originally Posted by Samurai

So we can agree that California very very rich, it is the biggest economy even within USA. Yet, it has 50% of the homeless of USA, and they live in really bad conditions, and are even forced to live in the desert.

This tells us that capitalism doesn't solve poverty. It even creates it.

Wrong conclusion drawn on the basis of limited data.

How many of these poor and homeless became such after (or because of) California becoming rich? In other words, were they well off earlier?

Second, how many of these seeing California's success, got attracted towards it, and migrated from other parts of US, (but now CA's economy is not able to fulfill their aspirations)? We see this intra-country migration in India also, where people from North and East migrate towards West or South. That doesn't mean poverty is being created.

(At the risk of being called callous or insensitive, I think that CA's temperate weather may also be a trigger for the homeless in other parts of US to migrate to CA; it's better, weatherwise, to be homeless in CA than in MA).

Thirdly, unless we have real comparative data about (lack of) homelessness in socialist utopias like Cuba or Venezuala, we really can't conclude anything.

ps - Somebody should show this Vice news video to the people trying to migrate from South American socialist utopias into the US.