Shark Tank India is one of the most popular shows in India. The profile of the show has seen a major rise, thanks to the dramatic nature of it, which appears to appeal to the senses.
Loss Making Sharks?
In addition, for many who appear on the show, with their pitches, it could also be a possible avenue to put themselves on the map and make their case.
One of the biggest attractions of the show is the show’s judges or ‘Shark’. Looking into these sharks and their profile, a Reddit user took to Reddit to ask a salient question on the business of these sharks and how they are viable.
In the post, the Redditor asked the community, “Can someone explain how these companies survive this long ?”
This post included a graphic of Shark Tank sharks and a brief look of their companies and their performance.
The user further asked, “I read on this subreddit, that more than P&L such large business survive or runs because cash flow. Can someone explain ?”
It’s Called Runway
The Reddit community was more than welcome and spoke of their theories.
One user said, “That seems to be the case for the most of the companies mentioned above. Except Acko and Inshorts rest of the companies are doing really well given they have very minimal negative margins (losses/revenue).
This points toward intentionally booking small losses in order to avoid taxes and invest that money in R&D or other business development initiatives.”
One user invoked the concept of ‘Runway’.
The user said, “There is something called a runway for every company. It can be anything from 1 month to several years. If a company reports loss for a year it does not mean the end of it. If it comes to worse then these companies can easily do a down round and raise more money and survive.”
One user observed, “Mind you the reason namita is showing profitable is because of her going ipo other sharks also are not in such serious losses they do this to evade tax. In some months you may also see boat showing profits in order for their ipo these startups are also backed by bigger VC funds.”
Why Invest In A Loss Making Business
Another user combatively commented, and rebutted the idea of showing losses for taxes.
The user said, “People here saying that these companies are SHOWING LOSSES TO SAVE TAXES should actually learn how businesses work. If it was that easy to SHOW LOSSES, what do you think is stopping Adanis, Ambanis and Birlas to keep reporting losses? Don’t they know how to SHOW LOSSES? No sane investor wants to be associated with a loss making entity, it is not a business if it keeps making losses after years without any road to profitability.”
The user further added, “VCs just want to make these loss trucks to reach the IPO and then dump all this to the naive people and make humungous profits. So VCs keep pumping money if they see the road to IPO.”
