We promise not to mention the U.S. election in this week’s Unicorn Tracker. Because, you know, there are other things to talk about.
While one nation (guess which one) ponders whether it wants to entertain an existential crisis or not, firms can have their own moments of soul-searching, too. What do you do when you are a unicorn burning through cash and getting marked down by current investors? What do you do when you want to grow even when those two events are happening concurrently?
The news came late this week that Flipkart, India’s eCommerce giant, had been written down by two U.S. funds holding shares in the firm. As reported by India’s Economic Times, the markdowns from Valic and Fidelity made public in two regulatory filings mean that at least some holders think Flipkart is worth less than it was before. Valid Fund I took down its estimates of Flipkart by 11.3 percent to a new value of $95.84, while Fidelity said its holdings were worth 3 percent less than it had estimated previously, at $81.55. The site noted that both funds have seesawed their valuations across the past several quarters.
And if that thinking becomes more widespread, the usual method of sustainability — which is going back to the well, so to speak, for funding — has perhaps gotten a bit harder. If it is more difficult to go to private markets to raise money, then firms can go public (which is not a great path to pursue if one’s valuation is getting marked down) or they can rely on the cash generated on their own day-to-day operations.
Looks like the eCommerce giant wants to go the latter route, which includes plans to slash its cash burn rate by as much as $150 million to $200 million through the next year. Considering the fact that the company’s burn rate is projected to be on the order of $40 million or more a month, according to the Economic Times, such restraint could have a marked and positive impact on operations (and, by extension, investor sentiment). The firm would likely look to redeploy what it doesn’t spend outright into growth initiatives, a must in a hypercompetitive industry, where scale leads to competitive advantage. In addition, Flipkart is said to be in talks with none other than Walmart for an infusion of as much as $1 billion.
Elsewhere, Airbnb and co-plaintiff HomeAway are headed to a hearing in San Francisco court next week, as the firms seek a temporary injunction against short-term rentals being subject to a fine of as much as $1,000 daily should they not arrange their bookings in strict conjunction with registrations within that city. Critics of the unicorn say that the rental for income business in fact makes housing less affordable in San Francisco.
Klarna earlier this week that it would expand further into the U.S. with a partnership with Wacom, with retail financing available to merchants using both firms’ technology at the point of sale online (i.e., not at brick-and-mortar locations).
And in news that is tied to valuation for a different firm, SoftBank, based in Japan, has written off as much as $555 million in two of its investments, Ola, the cab-hailing firm, and eCommerce firm Snapdeal, both based in India. Lest it be thought that the write-down is necessarily a commentary on the business practices and viability of those practices, Livemint said that the write-downs were the result of currency fluctuations. Nonetheless, the site said, both Ola and Snapdeal have been looking to raise money from investors in order to expand and also fend off competition.