Startups, especially those aiming for initial public offerings (IPOs), are focusing more on improving their financial performance than just growing rapidly. This means they are paying closer attention to making profits. To achieve this, many startups are cutting down on their workforce and making changes in their leadership teams.
For instance, Swiggy, a popular food delivery firm, recently went through a restructuring phase. This was partly due to pressure from investors like Prosus and SoftBank, who were keen on seeing better results before Swiggy’s $1.2-billion IPO. In January, Swiggy let go of around 350-400 employees. Additionally, it merged its premium grocery service, InsanelyGood, and Swiggy Mall with its quick-commerce service, Instamart.
Even well-established startups and industry leaders must carefully navigate the IPO process. Somdutta Singh, an LP angel investor and former member of Niti Aayog, emphasizes the importance of profitability. Take Swiggy, for example. To attract investors, the company must demonstrate a clear path to profitability. Trimming unnecessary expenses, especially in non-essential areas, can help Swiggy present a more attractive financial profile to potential investors.
Singh points out that while Swiggy’s main delivery business is doing well, newer ventures like Instamart might not be making profits yet.
The Good Glamm Group, a content-to-commerce platform, is planning to go public by Diwali 2025. In the last 12-15 months, it has reduced its workforce by 15% or 150 employees as part of cost-cutting measures. This move is aimed at achieving profitability in FY25. The company’s new CFO, Kamal Lath, is expected to play a key role in this transformation.
Over the past year, The Good Glamm Group has undergone a restructuring process and has raised Rs 245 crore through a rights issue. This funding, which came at a flat valuation of $1.2 billion, was secured from existing investors, including Warburg Pincus. The company has also given many promotions to boost morale during this period.
Ixigo, a travel tech startup gearing up for its IPO, had a remarkable turnaround in the financial year 2023. After facing a net loss in the previous year, it bounced back strongly with a net profit of Rs 23.4 crore and operating revenue of Rs 501.2 crore. This turnaround seems to align with its IPO plans, according to Karan Gupta, an expert in financial structuring and investment strategy.
In a similar vein, Dunzo, a company backed by Reliance Retail, raised $75 million last April but also reduced its workforce by 30%. On the other hand, companies like InShorts, Dealshare, Cultfit, Mygate, and Third Wave Coffee have appointed new CEOs to improve governance and profitability. Streamlining operations and enhancing financial metrics are seen as crucial steps to make these startups more appealing to public market investors and late-stage venture capitalists.
Some companies are diversifying their product lines, forming strategic partnerships, or investing in technology for sustainable long-term growth. For example, Unicommerce, a SaaS startup backed by Snapdeal, recently introduced a GenAI platform called UniGPT to assist e-commerce companies.
Flipkart’s focus on profitability has also paid off, as shown by the cash infusion of about $111 million from related entities based in Singapore in January. By renegotiating deals and leveraging data analytics, Flipkart has improved customer experience, leading to higher retention and repeat orders.
Prioritizing profitability before an IPO is a common strategy globally. Twitter, before its IPO in 2013, focused on increasing advertising revenue and streamlining costs. Similarly, Airbnb made significant cuts to its marketing expenses and reduced its workforce to improve profitability ahead of its IPO.
