A notable transition towards profitability is occurring within the startup ecosystem due to the reduction of venture capital and private equity investments. Due to the shift in investor perception, businesses are now prioritising sustainable growth over rapid expansion. Notable unicorns that have achieved profitability in FY24 include Oyo, Zomato, and Mamaearth from Honasa Consumer.
Rising Profitability Among Startups
Numerous firms have made the shift to profitability in the last year with success. Among them are the food tech behemoth Zomato, the consumer goods company Mamaearth, and the travel tech startup Oyo. Furthermore, Mensa Brands’ MyFitness and Lendingkart have also reached profitability at the EBITDA level. This is a considerable increase over prior years, when only two unicorns turned profitable in FY22 and one in FY23, according to Tracxn data.
Broader Trends in Profitability
In addition to these unicorns, eight other startups turned a profit in Q3 or Q4 of FY24, and one more turned a profit in Q1 of FY25. Among these unicorns making significant progress are Delhivery, Myntra, MobiKwik, Meesho, and Urban Company. Myntra reported gains in Q3 and Q4, while Delhivery and PB Fintech generated a profit in Q3. Meesho in Q2, Awfis and Sugar Cosmetics in Q4, MobiKwik in the first half of the year, Practo at the EBITDA level in Q4, and Meesho in Q2. Urban Company made a profit at the beginning of the current fiscal year.
Investor Perspectives
Partner at Khaitan & Co. Prasenjit Chakravarti predicts that by FY25/26, 20–30% of the top domestic startups will be profitable. He sees the recent trend of Indian startups being profitable as an indication of a larger movement towards financial sustainability. According to Anurag Ramdasan, a partner at venture capital company 3one4 Capital, over 40% of growth-stage businesses should achieve profitability milestones in the following two to three years. He does, however, issue a warning that such expectations are unreal for startups, since growth and product-market fit continue to be the fundamental measures of wealth generation.
Shift in Startup Strategies
The emphasis has clearly shifted from “growth at all costs” to operational efficiency, according to analysts. Earning a profit is becoming a crucial lever for entrepreneurs, especially those aiming to go public, says Karan Taurani, senior vice president and research analyst at Elara Capital. According to founder and CEO Abhishek Kumar, this transformation is visible in the strategic choices made by businesses like MyGate, which set out to achieve cash break-even by December 2023 and 0% cash burn.
Operational Efficiencies and Economies of Scale
According to Taurani, increased operating efficiencies and economies of scale are helping startups become more profitable. Analysts caution that startups’ long-term viability and general health should not be jeopardised by this emphasis on profitability. Cost-cutting strategies that compromise customer happiness and product quality should be avoided by businesses since they might result in a decline in customer loyalty and service standards.
Maintaining Balance
Startups should also exercise caution when expanding quickly without sufficient operational management, as this can result in inefficiencies and higher expenses that compromise long-term viability. retaining high standards of product quality and customer satisfaction while retaining profitability requires striking a balance between growth and operational control.
Results
A positive trend among startups is their move towards profitability, which can be attributed to investor pressure and a deliberate emphasis on sustainable growth. This trend is anticipated to continue as more firms turn a profit, establishing new benchmarks for the soundness of the economy and operational effectiveness within the startup community. To achieve long-term success, businesses must carefully negotiate this change, striking a balance between cost control and quality and customer happiness.
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