How to analyze Startup or new-age companies?🤔 Would it be justified if we value these loss-making companies with the traditional method? NO!❌ So, let's understand how can we value them 🧵⤵️ (1/6)

 Digital First Companies:

These companies first aim at increasing their customer base👥 & their retention & later comes the question of profit.💰

Let's see how we can analyze these companies:

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1. Focusing on the right metric can help

Amazon was in losses for the first 20 years, evaluating it in terms of its profits would've made the company seems valueless. Rather, we valued it in terms of how much market the company is capturing & the value that it is creating.

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2. User Acquisition Cost

To sustain an online business, it's important for a business to have an increasing number of users of its product & services.

The lower the cost of getting a user, the better it is for the investors.

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3. Replacement Cost

Taking the example of Zomato, would you be able to set up a better company using the kind of funding that Zomato received?

If the answer is yes, then the company is overvalued.

If your answer is no, then the company is clearly doing a great job.

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Do u think these new-age companies like Zomato, Swiggy, Paytm, and Uber has a bright future?