Growth First, Profits Later?
For decades, profitability was seen as the clearest sign that a company was ready for the public market. But the rise of startups has challenged that traditional model. Many young companies prioritise rapid expansion, technology, customer acquisition and market share, accepting losses in the early years with the expectation that scale will eventually improve profitability.
When Going Public Makes Sense
An IPO can make sense when a startup has strong revenue growth, improving unit economics and a credible path to sustainable cash generation. Public capital can help fund expansion, technology, infrastructure and new markets. For capital-intensive sectors such as manufacturing, mobility, deep tech and biotechnology, profitability may take years even when the underlying business has significant potential.
Zomato offers a useful example. When it went public in 2021, the company was still reporting losses, but investors were willing to back its long-term growth opportunity in India’s expanding digital food-delivery market. Its journey demonstrates that a startup does not necessarily have to be profitable at the time of listing if investors can see a credible path toward stronger business economics.
Growth Cannot Be the Only Story
Zomato also highlights why the path after an IPO matters as much as the IPO itself. The company continued focusing on improving margins, controlling costs and building sustainable operations. The lesson is important: losses can be acceptable when they are part of a clear strategy to build a stronger business.
By contrast, simply reporting rapid revenue growth while continuously consuming capital can become a warning sign. Investors need more than impressive user numbers or headline growth; they need evidence that the business model can eventually generate sustainable returns.
The Public-Market Reality
An IPO changes the rules for founders. Once listed, startups face greater transparency, shareholder expectations and pressure to deliver consistent financial performance. This discipline can strengthen governance, but it can also encourage short-term decision-making if management becomes overly focused on quarterly results.
Nykaa provides another perspective. Its public-market journey demonstrated the appeal of a startup entering the market with a more established business model and a clearer focus on building sustainable operations. The contrast between different startup IPO journeys shows that there is no single formula for determining when a company is ready to go public.
What Should Investors Really Ask?
For India’s growing startup ecosystem, the real question should not simply be whether a company is profitable on the day it lists. Investors should examine whether revenue quality is improving, cash consumption is under control, unit economics are strengthening and management has a credible route to sustainable profitability.
The experience of companies such as Zomato and Nykaa suggests that the quality of the business model and its evolution after listing can matter more than a single profit-and-loss statement at the time of the IPO.
The Bottom Line
A startup does not necessarily need to be profitable before an IPO. But it does need to demonstrate that profitability is a realistic destination—not simply a promise attached to a high-growth story.
For founders, the IPO should be viewed not as the finish line, but as the moment when the business must prove its potential to an entirely new audience: the public market.
