Nithin Kamath on why billions being invested into Indian non-profitable startups

In a series of tweets, Kamath, who is known for his educational posts on startups, markets and business, said the venture capitalists are betting on the fact that India will reach a stage where the per-capita income will be $4,000 and that’s when the magic is supposed to happen

“Why are billions being invested into Indian non-profitable startups by VCs when it is well known that today the cost of acquisition (CAC) is much higher than the lifetime value (LTV) of customers in most B2C businesses?,” Kamath tweeted

India is at around $2,000 per capita GDP, and the bet is that it will be at $4,000 in a few years from now, he said, adding that the $4,000 is when the magic is supposed to happen, as it did in China.

Kamath said the essentially bet of VCs is on rising disposable incomes and increasing purchasing power.3

“India is one of the fastest-growing economies in the world. Tens of billions of dollars are waiting to enter India, no way around it. When money eventually comes in, it will be forced to pay top dollar in terms of valuation to the leaders, regardless of the profitability,” Kamath said.