Within the Indian startup ecosystem, a new term is being used now, and it has captured the attention of investors and entrepreneurs alike. The term “Proficorn” has been coined to describe a profitable and sustainable startup.
Commenting on this, Beerud Sheth, founder & CEO, Gupshup said, “If you look at the profitability curve of any company, it’s a J-shaped curve. That’s generally the nature of any tech business and a tech company being unprofitable is not wrong because for months or years initially it is going to be inherently unprofitable till it crosses the hump.”
He further added, “When interest rates are high, money is expensive to borrow which means the growth slows down. The benchmark comparison is very high so the net present value or discounted cash flow becomes much lower. Suddenly, all the multiples, whether it is revenue multiples or earnings multiples, have reduced, and there is a valuation compressing worldwide. Companies that are unprofitable will be hit more, while the ones which are profitable or on the path to profitability, will be valued better.”
Gupshup, a startup which provides a messaging platform and is a profitable SaaS firm, has more than ₹1,000 crore in revenue in the fiscal year ending March 31, 2022.
According to a report by Tracxn, currently, India has 100 plus unicorns, but there are only 17 unicorns in India which are profitable out of the same.
The Proficorn is emerging as a category for investors who are looking for long-term returns. One can say that it is a growing trend which will reflect a shift in focus from just growing to profitability and sustainability within the Indian startup ecosystem.
As we see, there has been a pattern among the investors in the startup sector, they are attracted to the potential of a company. There has also been a focus on sustainable business models which eventually gave a raise to the concept of proficorns.
With Investors recognizing the value of proficorns in terms of risks associated with the changing market conditions, these startups tend to showcase a stronger business fundamental and an ability to adapt to market dynamics.
The idea behind bringing in this new term and concept was to also drive the startups by highlighting profitability and how it is a significant driver for a sustainable startup.
With proficorns leading the charge, the startup ecosystem in India is undergoing a significant transformation. As entrepreneurs are embracing profitability and sustainability as their focus, the overall ecosystem has the potential to become more robust, resilient, and capable of delivering lasting value to investors, customers, and society at a larger scale.
