Be Careful About The Large Value Of Startup Valuation, Analysts: Not Of Course Healthy From The Financial Side

Illustration. (Photo: Doc. Antara/Lifepal)

JAKARTA - Investment analyst and Managing Partner Frans & Setiawan Law Office Hendra Setiawan Boen assesses the phenomenon of the fall of several major startups showing that there are startups valuing billions of dollars but only on paper.

"It does not reflect the true value of startup companies," Hendra said in a statement quoted by Antara, Tuesday, November 22.

As is known, in 2022, the world will be shocked by the fall of several billion-dollar startups categorized as unicorns or decacorns such as Theranos, FTX, and Terra Luna.

Hendra said from the start he did not agree with the designation unicorn, decacorn or hectocorn. Because, according to him, this status can lead to assumptions in the minds of potential investors, as if the startup that already holds the title is certain to be a large, healthy company from a financial perspective.

"In fact, the valuation of billions of dollars is calculated from the investment commitments of investors who are not infrequently in the form of debt and must be paid back along with interest," said Hendra.

Hendra continued that in Indonesia there were also dozens of startups categorized as unicorns and even decacorns, but until now there are still chronic losses.

"Indeed, some of these losses are due to the inefficiencies of startups in managing finances and investment funds, for example giving large salaries and luxury facilities to workers for branding or jor-joran in burning money," he explained.

Hendra revealed that unicorn or decacorn-categorized startups such as Theranos, FTX, and Terra Luna, were later known to have failed, but the three startups did not experience business failures or business performance.

"But because of fraud and embezzlement with the perpetrators, it is none other than the founders, as well as poor startup management," he added.

Theranos founder Elizabeth Holmes was recently sentenced to more than 11 years in prison for being proven to have deceived investors through fake medical test kit startups. Do Kwon, founder of Terra Luna, is currently a fugitive for Interpol and the United States prosecutor's office is also investigating Sam Bank-Fried as the founder of FTX, he said.