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Investors double down on due-diligence; A guide to startup metrics

Instances of financial irregularities and malpractices by startups have prompted institutional investors to ramp up due diligence. Amit Somani and Shripati Acharya, Managing Partners at Prime Venture Partners cover the nuances of metrics at startups.

Investors double down on due-diligence; A guide to startup metrics

Monday June 26, 2023 , 5 min Read

Hello,

BYJU'S in a firefighting mode.

The edtech major has reportedly assured investors that it intended to submit audited financial statements for FY 2022 by September, and FY 2023 results by December this year. This comes after Deloitte resigned as the statutory auditor, prompting BYJU'S to replace it with BDO.

However, the recent turmoil at the company—with key board members resigning, increasing losses, pending loans, and layoffs—has reportedly brought down the morale of its employees. Many are even actively seeking alternative job opportunities out of fear of unexpected job losses, Reuters reported.

Meanwhile, Go First can heave a sigh of relief as creditors of the cash-strapped airlines have given in-principle approval for Rs 425 crore interim financing. The cash infusion is intended to support the airline's day-to-day activities and facilitate its revival.

ICYMI: In San Francisco, one restaurant is making 'trash pizza'. In Shuggie restaurant, the pizza is made using upcycled ingredients such as ugly mushrooms, misshapen peppers, discoloured tomatoes, as well as offcuts of meat.

In today’s newsletter, we will talk about 

  • Investors double down on due-diligence
  • A guide to startup metrics
  • Tapping into clean, vegan beauty

Here’s your trivia for today: Which country was the first to recognise Bangladesh after its independence in 1971?


Startup ecosystem

Investors double down on due-diligence

Recent incidents in the startup ecosystem in the country have led investors to ramp up diligence and exercise their right to information and investigation. The scrutiny is tighter in the case of early-stage companies. 

“We now insist on a proper financial diligence to be completed before every material round of financing, irrespective of whether a new incoming investor asks for it or not,” Rajat Agarwal, Managing Director at Matrix Partners India, tells YourStory

Tighter scrutiny:

  • Sanjay Khan Nagra, Partner at Khaitan and Co, says investors are unprecedentedly reaching out for limited due-diligence even before signing a term-sheet.
  • Swati Bhargava, Co-founder of CashKaro and EarnKaro, insists regular reporting is a necessity and "being transparent with investors builds trust and confidence."
  • Founder of a Series A edtech company says the additional task of sending out performance reports every quarter detracts from focusing on the growth and expansion of the business. 
Corporate governance

Corporate governance in startups


Entrepreneurship

A guide to startup metrics

Metrics help with monitoring the current health of the business as well as enabling accurate forecasts. Amit Somani and Shripati Acharya, Managing Partners at early-stage VC fund Prime Venture Partners cover the nuances of metrics at startups.

Key terms:

  • Total Addressable Market, or TAM, helps understand the market opportunity. Somani and Acharya encourage young startups to opt for a bottoms-up model.
  • The objective of LTV (Customer Lifetime Value) is to ascertain how ‘valuable’ a customer is to the business once they start using the service or product.
  • Churn refers to any customer who is retained in the current period as compared to a comparable previous period. Churn calculations should not include any new customers acquired in the current quarter.
PVP


D2C

Tapping into clean, vegan beauty

When Aakriti and Jayant Chhaparia decided to start a D2C brand to sell vegan products, they realised there was a dearth of homegrown manufacturers in the market. They founded La Mior in 2019 to white-label cosmetic products and launched their own in-house brand in 2022.

Vegan beauty:

  • La Mior has 100 SKUs in its private label and offers vegan lipstick, eyeshadow palettes, highlighter, filter, airbrush powder, foundation, moisturiser, etc.
  • The company relies on superfoods sourced from across the world to enrich its makeup and beauty line.
  • In FY23, its earned Rs 9.6 crore in revenue. Around 40% of La Mior’s revenue presently comes from white labelling and the remaining from its private label.
La Mior


News & updates

  • Soaring prices: The world's central bank umbrella body, the Bank for International Settlements (BIS), called for more interest rate hikes, warning the world economy was now at a crucial point as countries struggle to rein in inflation.
  • Increasing interest: The price of Bitcoin surged to over $31,400, reaching its highest level since 2022, fueled by growing institutional interest in the maiden cryptocurrency. It has managed to maintain a trading value above $30,000 for the first time since April. 
  • A long way: Nearly one-third of aviation sustainability officers in a GE Aerospace survey doubt the airline industry will hit its net zero goal by 2050. Aviation produces 2% to 3% of worldwide carbon emissions, but its share is expected to grow as travel increases and other industries become greener.


What you should watch out for

  • The initial share sale of Ideaforge Technologies will open for subscription.
  • Deadline to choose higher EPFO pension ends.


Which country was the first to recognise Bangladesh after its independence in 1971?

Answer: Bhutan. Though both India and Bhutan recognised Bangladesh on December 6, 1971, Thimpu's announcement came hours ahead of India's recognition.


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