Team-BHP - Startup shenanigans

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Originally Posted by dailydriver (Post 5405529)

A rather dull day at office became a lot more interesting after reading these remarks in

The sheer impudence and ease with which this worthy skirts with facts is numbing. This is nothing but dishonesty in daylight - dishonesty with your investors money and with your customers money. People like these founders give a bad name to entrepreneurs. Valuation can be in some measure, based on track record, be influenced by future cash flows as one of the factors. But when you cannot get your auditor to sign off on your books for 18 months then that is a direct result of open season fudging of revenue recognition. I believe the valuations the PEs garland these entrepreneurs with go straight to their heads. Unfortunately the media lionizes these folks thus giving the impression to the lay reader that this is what a entrepreneur is all about. The hundreds of successful entrepreneurs who created and built and run successful businesses in the last 20 years don't make headlines because they are focused on the business.

Article 1: Auditor did not sign due to the method used in the first place. Accounting changed because of the objection.

Article 2: I believe 10000 crores is again unaudited numbers. Let us wait till the actual numbers are out.

Article 3: Last I remember even communists can run newspapers.

Article 4: Unnecessary to bring in revenue unless there is a turn around to profit in FY22 as the comparison was with loss in FY 21.

Article 5: This is because otherwise Auditor wouldn't have signed the balance sheet which is the whole issue.

Unfortunately for that start up, these are newspapers and couldn't muzzle their voice with law suits unlike individuals. Typical brazen US style to stone wall investigations, dirt digging - mud slinging and wearing out opponents with law suits. Please try with more advertisements next time.

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Originally Posted by jetsetgo08 (Post 5406628)

Isn't that the first step for valuating(or over-valuating) a startup?

It's got nothing to do with startups.

Showing revenue due later as revenue already earned is dishonest accounting, whoever does it. Plenty do it, mind, so Byju's isn't exactly a unicorn of 'creative' accounting.

I doubt their auditor spent 18 months disagreeing with projected earnings. What's likelier to have happened is the auditor saying, 'Yeah no, that's NOT how you count your money. Let's take a quick math refresher'.

Touché.

An auditor refusing to sign off on your books for 18 months is almost unprecedented for a company this size. If this were a listed company the Board would be facing criminal charges. The degree of revenue recognition and other accounting fudges they indulged in would make even Vijay Mallya and Rana Kapoor blush. Quoting these names to convey an idea of the scale of their attempted sleight of hand and the cheekiness they are now displaying. I guess the cheekiness is the only fig leaf they've got left.

It will be most interesting to see which fresh investor comes in to buy out the existing lot. An IPO looks tough. The market finally learnt its lesson with PayTM. The likes of Byju's, Oyo may not be around in their current form in 2030 or not around at all. Too big to fail is a cheap myth propagated by dishonest American bankers in 2008 to cover their backsides. And Byju's isn't even big except in its incomprehensible valuations. To put things in context the losses of ~Rs 4500 crores puts this in the league of Air India in its days of infamy.

SoftBank cuts internal valuation of $10 billion Oyo to $2.7 billion | TechCrunch

https://techcrunch.com/2022/09/22/so...o-2-7-billion/

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SoftBank, the largest investor in Oyo, has cut the Indian hotel chain’s valuation to $2.7 billion at a time when the startup is months away from going public, a source familiar with the matter said.

Oyo — whose backers include Sequoia India and Lightspeed Venture Partners India (both of which have taken significant exits from the startup), Airbnb and Microsoft — was valued at about $10 billion in a round in 2019. Oyo has raised $3.23 billion in equity (primary + secondary) and debt funding rounds over the years, according to insight platform Tracxn.

Bloomberg News first reported about the valuation cut, noting that SoftBank had earlier slashed the Indian startup’s valuation to $3.4 billion. The revelation comes at a time when Oyo is months away from going public. The startup earlier this week updated its initial public offerings application to the local market regulator. Oyo originally planned to raise up to $1.16 billion in the IPO at up to $12 billion valuation.

From what little I know Oyo has a problem, like Byju on revenue recognition policy and consistency with accounting rules. The major shareholder who was singularly responsible for jacking up valuations to absolutely nonsensical levels of $10 bn have now chopped it down 4X!! In my own assessment based on my experience in this industry they are valued 3X too high even now if they have to have even a fighting chance to avoid a PayTM style fiasco. After PayTM these folks have realized that the uncanny investors on Dalal Street are not here to be had.

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Originally Posted by V.Narayan (Post 5407168)

After PayTM these folks have realized that the uncanny investors on Dalal Street are not here to be had.

Byjus and Oyo are overvalued for sure, but I feel they won't face the same fate that PayTM faced in the market. Unlike PayTM, Byju's and OYO have valid ideas that can be made profitable. PayTM was a mess of too many ideas with no unique selling point in any of them. I think if Byjus and Oyo get listed, the market will overvalue them just like the investors, in the hope that the idea will become profitable someday.

For whatever it is worth, Government of Karnataka has introduced an option called Entrepreneurship and Startup for the final year students of Diploma courses in Polytechnics. A similar choice will be offered to Engineering students as well.

Have a look at the Curriculum.

Though it is difficult to guess whether this will result in a large scale conversion of job seekers to entrepreneurs, this seems a step in the right direction.

Indians are generally prudent with their hard earned money. They cant be duped that easily because they will always view these high flying setups with some level of suspicion. So all these excel sheet based over valued companies and their ilk will come to a natural end, while leaving only good companies with a viable and sustainable value proposition to survive. It is simply the process of natural selection at work.

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Originally Posted by shankar.balan (Post 5412173)

Indians are generally prudent with their hard earned money. They cant be duped that easily because they will always view these high flying setups with some level of suspicion.

That was valid for the previous generation.
The new generation has been conditioned to saving less and enjoying more, akin to American society.
Also, there are influencers creating FOMO (Fear of Missing Out) amongst the new generation, hence we see many IPOs being over subscribed.

As for the shenanigans experienced by me, I have realized the start-ups will go to any length to acquire and retain customer when they have secured funding.

I was delivered Himalyan Salt from Zoff (a spice company) by Blue Dart when I placed my order on Cred. The delivery was OTP secured. The price I paid for this? INR 17/-.:Frustrati
I have had mobile phones delivered worth more than this and even they were not OTP secured.

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Originally Posted by turbospooler (Post 5412198)

As for the shenanigans experienced by me, I have realized the start-ups will go to any length to acquire and retain customer when they have secured funding.

It should read as below:

"As for the shenanigans experienced by me, I have realized the start-ups will go to any length to acquire and retain customer UNTIL
they have secured funding."