I have been an entrepreneur for 28 years. I have had a few successes (IndiaWorld, Netcore) and many failures. One theme through my ups and downs has been the focus on building profitable businesses. And that’s where I thought of the word “profi-corn” – as a counterpoint to the unicorn craze that’s been going around.
Unicorns are startups valued at a billion dollars or more. Many unicorns have been created in the past decade on the back of large fund raises and growth at all costs. In the post-Covid world, some will survive but a few will die. All of them will realise the value of profits.
There are two ways for companies to fund growth: they can raise external capital in the form of equity or debt, or they can generate cashflows and re-invest those in the business. I have focused on the second approach in both my ventures. One needs some initial capital – which comes from the founders (promoters). The aim is then to create a business model predicated on getting to profitability quickly and then continuously re-investing for growth. Without external investors, decision-making is faster and much more long-term.
That’s where I coined the word – “Profi-corn”. It describes a company that is profitable, privately held, promoter-funded and also has a reasonable valuation (say, $100 million or more). Given that many founders have 10-20% left in billion dollar unicorns, the wealth creation can almost be equivalent for the founders.
How does one go about ensuring profitability? Does being profitable mean sacrificing growth? What about gains for employees? What about the value addition that investors bring in along with the capital? What’s the right choice for founders? We will discuss these in forthcoming posts.