Zomato’s losses show profit’s still just a word for startups, meaning zilch

Real profits are a taboo word yet. Photo credit: Brian Tomlinson.

India’s biggest food delivery startup Zomato posted losses of US$73.09 million for the year ending March 31, its parent company said. That’s a jump of almost four times jump over last year’s loss figures.

Revenue doubled to US$27.48 million.

Once upon a time, the doubling of a startup’s top line would be good enough to sell the story of “growth potential,” but not anymore. As the tech startup industry evolves, investors and analysts have started demanding signs of self-sustainability from companies, and that makes Zomato’s recent numbers worrisome.

To be fair, Zomato is not the only startup around burning through money, none of India’s biggest names have turned black yet.

At last count, Flipkart raked in losses of about US$297.1 million for a year, as it kept picking up the tab for the many discounts on its website.

Across the world, the pressure to project a sturdy business to partners, VCs and even job candidates has become so intense, many startups have started claiming that they are, or will soon be “profitable” – but have gone on to take liberties with the definition of the term, a recent Bloomberg report said.

Real profits have remained elusive.

Photo credit: Mike Poresky.

The article cited how when Uber said it is profitable, the company left out equity grants to employees, along with interest and taxes. Lyft declined to elaborate its statement on “path to profitability”, and Airbnb declined the wire service details on an executive’s profitability comments.

In India too, there has been a flood of statements from startups that claim they will “soon turn profitable,” or are “profitable in major markets,” and so on, without many details to back those claims.

Earlier this month, Softbank-backed OYO claimed it had turned “profitable at an aggregated level.”

Zomato recently talked about cutting down burn rates and getting to eventual profitability, but if the latest results are anything to go by, those sound like hollow words for now.