{"id":5124,"date":"2020-11-17T17:54:57","date_gmt":"2020-11-17T12:24:57","guid":{"rendered":"https:\/\/sketharaman.com\/blog\/?page_id=5124"},"modified":"2020-11-18T19:57:39","modified_gmt":"2020-11-18T14:27:39","slug":"how-does-founder-have-networth-in-billions-when-company-does-not-make-profit-https-qr-ae-pnuda5","status":"publish","type":"page","link":"https:\/\/sketharaman.com\/blog\/archive-my-content-amc360\/how-does-founder-have-networth-in-billions-when-company-does-not-make-profit-https-qr-ae-pnuda5\/","title":{"rendered":"How Does Founder Have Networth In Billions When Company Does Not Make Profit? https:\/\/qr.ae\/pNUDA5 – DNU"},"content":{"rendered":"

How is it that Amazon doesn’t make a profit, yet Jeff Bezos’ net worth is in the billions?<\/strong><\/p>\n

The question is temporally flawed since Amazon does make profits today.<\/p>\n

But there was a time when Amazon made losses and still Jeff Bezos\u2019s networth was in the billions – or at least hundreds of millions. Besides, there are so many companies that make losses now but their founders have networth in the billions e.g. Tesla \/ Elon Musk. So there\u2019s nothing structurally flawed with the question.<\/p>\n

The resolution of the apparent disconnect inquired about in the question lies in the disruptive change in the nature of business over the last 10-odd years.<\/p>\n

Once upon a time, a founder started a business, the business made profits, the founder took home the profits, that determined networth. So rich founder meant company was profitable. Per contra, if company made losses, founder couldn\u2019t be high networth individual.<\/p>\n

Those days are gone. Profit is so 20th century.\u00a0The Entire Economy Is MoviePass Now. Enjoy It While You Can. (Published 2018)<\/a><\/span><\/p>\n

Especially in the case of new-age companies that are household names like Flipkart, PayTM, Spotify, Tesla, Uber, et al. These companies make losses but their founders are rich. That\u2019s because, while the companies may be making losses, they happen to enjoy market cap in billions or more. As a result, their founders, who have substantial shareholding in the companies, are worth billions. As I highlighted in\u00a0The Six Secrets To Attract Venture Capital<\/a><\/span>:<\/p>\n

\n

(The VC Investment Model has) Created a new paradigm in which wealth can be generated without profits. Gone are the days when a company had to make profits for its stakeholders to become rich. Today, promoters and investors of many VC funded companies have become billionaires even though their companies have never made profits e.g. Flipkart, PayTM, Uber.<\/p>\n<\/blockquote>\n

Just for reference, over 70% of tech companies that IPOd last year in the USA made losses. Still many of their Founders have networth in the hundreds of millions if not billions.<\/p>\n

While on the subject, you might also want to check out another answer on a related subject\u00a0Ketharaman Swaminathan’s answer to Why are startups such as OYO, Uber firing so many employees during Corona Pandemic although they have a valuation in billions? Where has the money gone now? Were they not able to sustain even for 2 months?<\/a>\u00a0.<\/p>\n","protected":false},"excerpt":{"rendered":"

How is it that Amazon doesn’t make a profit, yet Jeff Bezos’ net worth is in the billions? The question is temporally flawed since Amazon does make profits today. But…<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":3722,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"class_list":["post-5124","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/pages\/5124","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/comments?post=5124"}],"version-history":[{"count":0,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/pages\/5124\/revisions"}],"up":[{"embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/pages\/3722"}],"wp:attachment":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/media?parent=5124"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}