What is unique about it?
You are investing in making money, so it’s very general to invest only in companies making a Profit. Correct?
Wrong.
There are some companies known as Start-up. They are starting their life. There is considerable potential in the sector, but also many competitors are giving you competition. It may increase your Cost as you may lose market share. No guarantee that one will survive in the cut-throat competition. What is the operation? Is the management Proven? Many questions. And Warren Buffett doesn’t like it.
In startups, the problem is not with the LOSS. Sometimes the loss is constructive. Like before the E-Commerce revolution, Last-mile logistics are not so Good. Shops and many more things were not there. It was all because Flipkart and Snapdeal made a tie-up with a seller, giving them a chance to do their business. They also Build Good Infrastructure. But for That, They are showing losses. Maybe there is value generation, but it’s difficult to calculate with the help of our regular accounting.
Let’s say Uber. How can you Evaluate them with the help of classical Accounting standards? For example, how to define Gross Merchandising Value as per Classical Account?
The best example is the Dot-com time. Yes, Amazon and Google are here, but there are many more Companies. Where are they? What happened with the money invested in them?…
Another example is Indian E-Commerce. Flipkart, Paytm and Snapdeal, for that matter. But that is not all. There are many.
The Basic rule of thumb here for him is that the company should increase Profits for at least five years in a row.
