With a slew of B2C startups eyeing entry into Dalal Street, Zerodha CEO Nithin Kamath said Thursday that founders need to undercut and outperform investors, not the other way around.
“Doing well means creating wealth with the lowest volatility. Sharp declines tend to scare retail investors; they panic and fold at lows. So slow compounding in the long run, not maximum valuation in the short run. That means underselling and overdelivering, not the other way around,” Kamath said on Twitter.
He said setting the right expectations, being transparent, and not overselling are great ways to reduce stock price volatility before and after an IPO. “If you do this well, shareholders can feel like owners and help reduce the cost of customer acquisition, the biggest cost for B2C companies.”
The Bengaluru-based startup billionaire, who along with his brother and trader Nikhil Kamath Zerodha built India’s largest stock brokerage platform with a profitable business model without external funding, said B2C startups worldwide that have gone public in recent years are ignoring one of their companies’ greatest assets – an opportunity to turn millions of social media influencer retail shareholders into brand ambassadors.
“From the moment a founder raises money from VCs and PE, they are primed to start thinking about maximizing valuations. This means building a narrative that can price in the best possible outcome for the company. But what does it take to be successful as a public company? is different,” Kamath said.
Earlier in the week, direct-to-consumer (D2C) company Mamaearth was heavily criticized on social media platforms over plans for an IPO, prompting co-founder Ghazal Alagh to clarify that she neither quotes nor subscribes to the valuation figures mentioned in it have reports.
“Determining the valuation is a process that will take place over time as we engage in deeper discussions with the investment community,” Alagh said of reports of an astronomically high valuation for the proposed IPO. (Disclaimer: Experts’ recommendations, suggestions, views and opinions are their own. These do not represent the views of The Economic Times.)
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