Cash burn model in business: A study of select start-ups worldwide in achieving profitability Gupta Charudev1,**, Goel Jitender2,*, Goel Sandeep Kumar3,*** 1Student, Department of Commerce, Acharya Narendra Dev College, University of Delhi, New Delhi, India 2Assistant Professor, Department of Commerce, Acharya Narendra Dev College, University of Delhi, New Delhi, India 3Professor, Department of Commerce, Acharya Narendra Dev College, University of Delhi, New Delhi, India *Corresponding author) email id: jitendergoel@andc.du.ac.in
**charudev27@gmail.com
***sandeepgoel@andc.du.ac.in
Online published on 6 January, 2025. Abstract The cash burn model of business involves a way of achieving growth by increasing the customer base of the business without achieving profitability. To fund their operations as well as other expenditures for the initial period, these start-ups take the help of funds raised from investors or sometimes government grants. In this context, the present paper attempts to discuss the concept of the Cash Burn Model, analyze the case of select start-ups that are using the Cash Burn Model, and find out the feasibility of the Cash Burn Model for the Indian economy in order to give practical suggestions to the new-age startup founders about when and how they should decide to adopt the cash burn model as their business model for the initial phase of their incorporation. The select start-ups for the present paper include Flipkart, Byju’s, and Ola. It is found that companies that have employed this model of business and are market leaders in their industry, even after so many years of existence, have not been able to become profitable. The investors of such companies have also not been satisfied with the results that they are getting, and hence they are finding ways to exit from the deal; one of the popular ways to do so is by the issuance of an IPO. It is concluded that these companies should aim for profitability after gaining a certain market share of that product, which for now can be achieved by some innovative ideas for properly monetizing the services they provide to their customers, and that can be achieved by changing the mindset of the consumers. Top Keywords Cash burn, Start-ups, Funding, Burn rates, Cash flow, Profitability, Startup Ecosystem. Top |