An entrepreneur's key role is to keep the startup relevant: Paytm's Vijay Shekhar Sharma

Fintech company Paytm's Founder Vijay Shekhar Sharma told a rapt audience at TechSparks Delhi that the decisive factor in a startup's success was whether it managed to build use cases for its products and services around evolving technology, or not.

“As an entrepreneur, your primary role is to keep the company relevant, and be where the vibrance is,” said VSS, as he is known in startup circles, on the second day of TechSparks 2023 in Delhi. 

From a value-added service provider to a fintech company, to a super-app for all transactions—Paytm has come a full circle. The company has shrunk its commerce vertical owing to growth challenges, and now, looks at commerce as an enabler with payments as its mainstay and monetisation through financial services and insurance.

“India’s commerce is known as—slow, did not grow—according to global investors,” he told Shradha Sharma, Founder and CEO of YourStory, during a fireside chat. “Commerce will be vibrant only when the marketplace model grows."

Going ahead, Sharma says that Paytm is geared toward streamlining its credit business directed at small and medium enterprises. 

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Free cash flow is the only KPI

While building a business, free cash flow is the only vanity metric people need to focus on, instead of GMV, profit and loss, or revenues, said VSS. 

“Over the next 10 years, the single KPI (key performance indicator) you will be measured on is how much free cash flow you generate—it is not revenue, it is not profit, it is not size… If free cash flow is the benchmark, we will be in the top spot among the companies in these countries,” he said.

He further added that the funding winter has been an exaggeration. “It is the weather, my friend,” he said, with a word of caution for entrepreneurs on spending at the cost of profit and loss or cash.

The lack of loans at low interest rates and expenditure at the cost of the cash flow will impact businesses in the coming years, as new startups do not have the privilege of startups that were raising funds between 2010 and 2020.

“Cheques are now being given on numbers in the projected tractions, rather than money being raised based on metrics such as ideas, product-market fit, customers, and traction,” said VSS.

The IPO story

Paytm came out with its public listing in November 2021, and it was the earliest among multiple internet stocks that followed suit. The stock has been an under-performer from its IPO price of Rs 2,080 and was trading at Rs 879.15 at 2:25 pm on November 30, BSE data showed. However, its value has more than doubled over the last one year.

VSS said being a publicly listed company was like receiving a scorecard every single day. “We were down 5% on the first day of listing,” he said, “We were learning the biggest lesson of our lives while going public and learnt what would have taken us three to four years within six months.” 

Sharma said that macroeconomic conditions in the global market impacted Paytm's share price, as inflation rose in the US markets. While private markets allow for vanity metrics, it is difficult to leverage them in the public markets. 

Wrapping up the session, he said, "It is time to reset the metrics for startups on the growth path."