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What numbers are considered sane in the Startup World?

Updated: Jun 7, 2021

Ratio analysis is important. That’s what our school accounts teacher told us and that’s what the financial expert at cnbc tells us. It’s however funny that no one ever tells us the success formula with ratios... so we settle with some self-imposed wisdom that -- Life is more about the journey than the destination.

But have you ever wondered what ratios are considered sane in the startup world? If yes, hop on, let us give you a ride:

We dug around and plotted the data of 68 Indian startups for the Financial Year ended March 31, 2020. Startups from different industries and of varied sizes. Here’s the most intriguing ones:

(PS. You can use this data in 2 ways: To crack wise in an intellectual conversation and/or for your own startup by benchmarking expenses based on your age, industry and funding received):


Analysis 1

Recipe: We grouped the 68 startups into different age groups. For each group, we derived the median of 'Total Expenses to Total Sales ratio' and the outcome was as expected: with increase in age, the ratio reduced. Outcome:

How to read it

The 0 to 4 years group, for example, comprises of 7 Startups, including CRED, MPL, Navi Technologies etc. The group's total expenses at an average comes to 3.9 times its total revenue.

What’s noteworthy

Even for startups aged 13+, the total expenses are greater than the total revenue and we’ve got 14 startups in that group (including Flipkart, PineLabs, BookMyShow etc.). Indian tech Industry indeed has a long distance left to cover.


Analysis 2

Recipe: We grouped the 68 startups into different industries. For each group, we derived the median of 'Total Expenses to Total Sales ratio'. Outcome:

How to read it

The Logistics group, for example, is made up of 5 Startups including Dunzo, Delhivery, etc. The group's total expenses at an average is 138% of its total revenue.

What's noteworthy

  1. The Online Gaming (includes MPL & Paytm First Games) and Edtech (includes Coursera, Unacademy & Vedantu) Industries have been witnessing a funding boom since the last 2 years, allowing them to enable blitz-scaling at the back of mammoth expense budgets.

  2. The Fintech (includes Paytm, Phone Pe, Policybazar, etc.), E-Commerce (includes FirstCry, PepperFry, SnapDeal, etc.) and Travel Aggregator (includes ClearTrip, Goibibo & MakeMyTrip) Industries are the most mature in the Startup ecosystem, having a median age of 11 years. Their ratio also appears to be in a close range: 120% to 130%.

  3. The SaaS group is sassy: the only industry that seems to be making money in the ecosystem is SaaS (Software as a Service), consisting of Zoho, Icertis & Druva, etc.


Analysis 3

Recipe: We grouped the 68 Startups into different funding levels (based on total funding received as of 31/March/20). For each group, we derived the median of 'Total Expenses' and 'Total Sales'. Outcome:

How to read it

The $201-300 Million group, for example, represents the group of all those Startups that have raised a total funding of $201-300 Million up till 31/March/20. There are 13 Startups in this group, including Bounce, Meesho, Rivigo, etc. For FY'20, their average Total Revenue amounted to ₹342 Crore while their Total expenses were ₹542 Crore.

What's noteworthy

The outcome is as one would have expected. The more the funding received, the more the Startups are able to spend and earn. The big question is, what came first? The funding or the traction?



Recipe: Let’s go 1 step further. Advertisement expense is one of the major components of cost for any Startup. So, we derived the median of 'Advertisement cost to sales ratio' of 28 startups, grouped into different industries. Outcome:

How to read it

The Fintech Group, for example, represents all those Startups that are functioning in the Fintech space including Crediwatch, Upstox, Razorpay, etc. There are 6 Startups in this group. For FY'20, their average Total Advertisement to Total Sales ratio was 26%.

What's noteworthy

If we group the 28 Startups by age, it is seen than Startups aged 10 years or less show a ratio of up to 30% while above 10 years, the ratio comes down to 10-15% bracket.

In conclusion, it can be said that the ratios above truly capture the aggression of the Indian Startup ecosystem that is chasing 3-digit level of growth. When Startups even beyond the age of 13 have a 'total expenses to sales ratio' of more than one (1.09), it tells us that our ecosystem still has a lot to figure out and the break-even point is yet to be found. It is no secret that what really attracts the majority of foreign investors to our ecosystem is our massive consumer base (total number of smartphone users in India is expected to reach 829 Million by 2022). However, it is now visible that selling digitally enabled services to a crowd that is so accustomed to the more conventional ways of living comes at a huge cost.


This article is a part of the May'21 edition of our Startup Newsletter. Here's the complete publication:


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