While Uber and Flipkart maybe among the most prominent startup Unicorns, commanding sky-rocketing valuations, ace investor Rakesh Jhunjhunwala says he doesn’t understand their business model.
While Uber and Flipkart maybe among the most prominent startup Unicorns commanding sky-rocketing valuations, ace investor Rakesh Jhunjhunwala says he doesn’t understand their business model. Speaking at a recently held Global Business Summit Rakesh Jhunjhunwala said that he doesn’t believe in the valuation of Uber, as he doesn’t’ understand its economic model.
“When I keep incurring a loss of $15 billion or $10 billion a year, that means I am subsidising my customer. I will know my true consumer when I charge the true price,” Rakesh Jhunjhunwala said. Interestingly, after SoftBank’s investment last month, the ride hailing app provider Uber is now valued at a staggering $72 billion. A recent deal between Alphabet Inc’s Waymo and Uber values it at that amount.
At the same event Rakesh Jhunjhunwala also said that he doesn’t invest in startups, adding that he doesn’t understand Flipkart’s business model. “I do not invest in startups. When Flipkart was available seven years-eight years ago, I did not understand these companies,” the ace investor said adding that Radhakrishnan Damani-run D-Mart (Avenue Supermarts) was profitable from its inception and he doesn’t agree with the prediction that D-Mart will perish while Flipkart will succeed.
Valic Co had slashed Flipkart’s valuation to about $7.9 billion in October-17, way below the $11.6 billion valuation at which Flipkart raised had raised capital earlier in 2017. Interestingly, Rakesh Jhunjhunwala had earlier stayed away from the online e-commerce space in India, due to concerns over valuations, business models and a lack of cash flows.
“I would like to see online companies with a profitable model and there isn’t any. I will believe in it when they sell at an economic price,” Rakesh Jhunjhunwala had said in a Leadership Summit in 2016. However, in December-17 th big bull of Dalal Street invested Rs 180 crore in gaming startup Nazara Technologies, saying that it has a consistent track record of delivering profits, cash flows, with efficient use of capital and a high ROE.