Cash burn is not always negative if a startup knows where and why it wants to invest money, said Kunal Bahl, cofounder of Titan Capital and Snapdeal.
He said cash burning is generally demeaned but it becomes necessary if a startup wants to scale the business. Traditional businesses also do a lot of cash burn but it is considered capex but if a startup wants to acquire customers and to build technology, it is termed as cash burn, he said while speaking at TiE’s India Internet Day 2025 event in Gurugram on Friday.
“Startups are thrown under the bus because of the cash burn. But if you look at traditional businesses, they also had a lot of cash flow. If you're setting up a steel plant, you will not have revenue for years. If you're setting up an airport, you're not going to have revenue for years. How is that getting funded? It is also getting funded with cash flow,” he said.
Indian startups have faced criticism for burning a lot of investors’ money in order to quickly scale their businesses. According to media reports, quick commerce companies are burning Rs 1,300-1,500 crore of money every month as the low margin segment faces increased competition.
Food delivery platform Zomato, which also owns quick commerce giant Blinkit, reported an year on year decline of 78% in its March quarter profit to Rs 39 crore from Rs 175 crore a year ago.
Swiggy has also been in losses since its listing due to high operational costs in its quick commerce segment Instamart.
However, Kunal said that there is not much difference between how a startup thinks about investing cash versus how a traditional business thinks about investing cash.
He said startups spend money on developing technology, gaining customers and building a brand. “That does not show up in the balance sheet. All these expenses go the P&L (profit and loss), which shows up as a negative item on the financial statements at the end of the year. So, people think these people are bad, they don't even know how to run a business.”
But investment in infrastructure by a traditional business is considered something that will create equity for the investors, he said.
“A startup invests money in acquiring customers, building the technology for the same exact reason, to build equity value for their shareholders. So, the end objective is identical in both cases,” he said.
