At a time when the start-up arena is facing a lot of headwinds in terms of funding and is in the limelight mostly for the wrong reasons, including massive layoffs, Harsh Mariwala, the founder of Marico, has an important piece of advice for the entrepreneurs.
The industry veteran believes that founders have to build a long-term sustainable model with a focus on profitability as well.
“Create a viable business from a long-term perspective. May be time frame has increased from what we were used to, but the path to profitability should be visible over a period of time. There should be a specific roadmap to achieve that,” says Mariwala.
“It's ok to increase sales but if your losses are more than your sales, there is something wrong. So, finally when the squeeze came in, the investors started becoming far more demanding. They wanted to see the visibility of profitability. They wanted to see growth but ultimately it has to be turned profitable,” he adds.
Mariwala would know as he spends a lot of time with the founder community through his Ascent Foundation, a not-for-profit venture for entrepreneurs. Launched way back in 2012, it currently has more than 800 members.
This assumes significance as the recent past has seen marquee names like Ola, Meesho, Byju’s, Vedantu, Unacademy, Cars24 and Plum, among others that have laid off staffers amid a funding squeeze.
On the current layoffs in the start-up arena, Mariwala says that entrepreneurs were splurging as liquidity was abundant and now with a squeeze, they have been forced to cut costs leading to layoffs.
“There was so much abundance of liquidity, the entrepreneurs started splurging… It is natural if a wave rises artificially high or superficially high, there has to be some correction… That led to a lot of correction at the entrepreneur's end like cutting some budgets, going slow on growth, reducing costs that led to layoffs, which was natural as what they were pursuing was artificial and not sustainable,” explains Mariwala.
He, however, adds that the correction was needed and now shouldn’t be too worried.
It's a correction phase that was required, he says while adding that good businesses will continue to do well as during the euphoria as well there were businesses that were managed tightly.
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