However, the headwinds that many disruptive companies face do bear uncanny similarities with the events in 2000. These include rising interest rates to tame inflationary pressures, excessive liquidity and over-exuberance in the stock market.There are already signs that investors have been growing wary of companies with high valuations. A high valuation generally means investors are paying money today for profits that might not materialise for years into the future.
Elsewhere, ProprtyGuru, which floated on the New York Stock Exchange in March, has seen its share price crash by 50 per cent since its initial public offering. Another factor that worked in Amazon’s favour was its robust business model. It was able to collect money from customers before its suppliers had to be paid. Its negative cash conversion cycle effectively provided Amazon with “free money” to grow its business.
Each start-up today will have a different game plan. But cash generation should be at the heart of their survival kit.Looking back at the dot-com era, perhaps the mistake that many investors made wasn’t that they believed the Internet would change everything, but that they underestimated just how big the Internet would become 20 years later.
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