Deepankar Rustagi ری ٹویٹ کیا
If you purchase 10 buses, they will run with barely any costs in year 1 and year 2. Between year 3 and 5, your maintainance costs rise, and the probability of a bus loss rises. Between year 5 and 10, your repair costs rise dramatically and you are almost certain to have lost one or two buses.
Startups behave as if the margins of year 1 and 2 are going to remain forever. They do not save for the years where things are degrading. The complexity of the business rises as you battle repairs, replacements, etc. At scale, the complexity rises exponentially - a single bike can introduce 3 "units" of complexity in getting lost - e.g finding it, rerouting driver, replacing it and so on.
All this complexity barely shows up in the first two years and then you have this cost and complexity factor that pops in around end of year 2 and just starts rising exponentially from there.
If the startup did something like take on debt with a moratorium, this repayment kicks in exactly as all the other costs arrive. It's a whirlwind of complexity that the first two years did not prepare the CEO for.
That's why the margins of anything with engines seems so amazing at the start, but then you look around and wonder why the guy on the streets do not all have massively profitable transport companies.
Africa makes the above problem WAY worse - bad roads, poor repair quality, unexpected incidents, low education drivers.
Such companies need proper nuts-and-bolts CEOs, not CEOs that are great at fundraising, but those that are all about the details. And such CEOs need funders that understand that the company needs to be funded, and the CEO cannot spend all their time chasing capital.
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