The end of growth at any cost?

10 May 2022

The sharp fall in the stock prices of high growth tech companies across the globe is getting crazy, feels like the dot-com boom. India has weathered the storm mostly because not many such companies are listed & many private ones raised a lot of money last year.

It is ridiculous how quickly the expectations changed from growth at all costs to generating free cash flows to survive the next 2 to 3 years since raising funds might be tougher. It is almost impossible for businesses to quickly adapt, especially the larger ones.

The other issue is that ESOPs given over the last 3 yrs will mostly be out of money & employee networth would have taken large haircuts. This could affect the morale of many, which will make it even harder for those running the business.

While listed Indian high growth tech stocks too have fallen quite a bit, they are very few and hence haven’t had a large impact on the rest of the markets. Indian private markets got lucky with all the money that got diverted from China to India last year.

Globally, India still has a lot of interest given our demographics, population on mobile+internet, & expected GDP growth. There is a lot of money waiting to enter Indian private markets, $25bil is what I am told. But FIIs pulling out money from public markets doesn’t add up.

But one hope I definitely have is that there is some correction in employee expectations in India, especially tech, product management, etc. It is ridiculous that startups have to raise millions to cover employee costs just to be able to launch a minimum viable product.

To raise that much, founders need to oversell the growth prospects & target market size to investors. This leads to setting goals which aren’t achievable and the business not being resilient or sustainable or profitable to weather storms like what we are seeing now globally.

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