Hey guys, you’re jealous of some young entrepreneurs, who own a million or even billion-dollar startup. Now you’re thinking about starting one. Then stay with me to understand how some entrepreneurs are making millions, While their business isn’t even profitable. If you have a passion definitely follow your dream but don’t follow these entrepreneurs because their business collapses at a time. So let’s see how they do it.
Let’s say you have an idea. So invest some money to set up your company, things like logo, name, website, etc. Don’t worry about the product. Now pitch your idea to a big investor like Softbank and demand for 1 million dollars (remember you still don’t have a product). Now use your marketing skills to convince the investor. If the investor likes your idea, you get the first round of investments and your company valuation becomes 10 million(no products). Then you launch your product.
Now you’ll get next rounds of investments like a dynamo effect. Let me explain, since you have got a good valuation and a big investor on board, so other investors will think there must be something in your company. So you’ll get a rain of investment which is called fund flow(without any profit). For this fund flow, your valuation rapidly increases which makes you and your investors rich(still no profit).
A good business model right. A loss-making product is making lots of money. But this happens until they get investments. When funding stops business collapse.
So the easiest way to prevent this fall is to sell the company. If you sell since you have got a valuation has grown big you and your investor’s share price will increase. So you get rich and the investors get a big ROI(Return of investment). But the buyer suffers since your business wasn’t making any money or there are other ways like making your company public by entering the share market.
Though WeWork a billion-dollar startup collapsed while they tried to become public.
I didn’t tell any names today because I didn’t want to make anyone embarrassed. So this is a wrap on this one, catch you guys on the next one. Till then stay safe. Peace.