This classic poem just came to my mind with name changes:
Bezos was in his counting house,
Counting out his money;
The VC was in the parlour,
Eating bread and honey.
The E-Com Investor was in the garden,
Hanging out the clothes,
When down came a blackbird
And pecked off his nose…
I was thinking of the 2 Billion of Amazon vs. 1 Billion of Flipkart discussion last week and was applying my mind to figure – what was the fight really about?
This led me to pull out Amazon’s financials of the past 10 years, which (not surprisingly) is a story in itself: (click on the chart to expand)
These are the KEY takeaways:
Data: Amazon last raised (seems returned) money from the PUBLIC market in 2008 (that’s the orange line shown by the black arrow when 8 million seems to have been returned (bought back). Note, the grey band is a ‘recession’ cycle in the USA.
Point: Amazon is a massively successful MARKET CAP Company that does NOT raise money from anyone. It spends what it EARNS. So skeptics – please note that Amazon DOES make cash – it just doesn’t show it so easily.
Data: Look at the Purple Line – that’s the CASH Amazon has on its books. Check how it gallops quarter on quarter.
Point: Amazon MAKES /INVESTS / LOSES (?) A TON OF CASH every quarter – See the light green line. This is the cash that Bezos throws around as and when Amazon wants to ‘activate a market’ etc.
Question is = Kaun Banega Kangaal?
In the case of Flipkart, I ASSUME that with the massive success of Alibaba’s float, FK will list on NYSE/Nasdaq and provide a massive exit (with 1000 multiples) to the early investors and triple digits to other latter investors.
The question is, how will FK or any other Indian E-com business FINANCE itself AFTER the listing if these businesses (as we read and understand) continue to LOSE CASH every quarter (which is why they raise money in the first place)?
And, if these companies DON’T go public, then what will be the appetite of VCs to keep funding a cash war fight?
Question – in the next few quarters, can we imagine any of the current Indian companies to have a financial performance streak like Amazon’s above?
Remember:
– Amazon is NOT JUST E-COM! It operates the largest Cloud Services business in the world, whose profits (losses?) it does not break out!
– It has a MASSIVE digital business that delivers digital goods to digital devices (books, etc) that do not lose money like the delivery business here.
– It HAS a strong & POSITIVE Annual cash flow that Bezos operates like a shower and turns it on and off as per his pleasure…
Question is – will retail investors understand this when they buy new E-Com stock?!
*****