13% of the world’s companies are ‘zombies.’ That’s not healthy
Are tech startups that don’t make money and depends on private equity funds zombie companies? Only if that situation lasted for 2 or 5 or 10 or … years?
Amazon lost money for years and kept growing using other people’s money.
Operationally AMZN is making money. AMZN cheats the government, not the investors, by re-investing would-be profit to fund capex such as AWS (big success) and later into huge acquisitions. In a way, better utilization of money than Apple keeping the money in Treasuries and giving to government.
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I meant to say this is how capitalism works. People give you money on your ventures and expect a payback if you’re profitable. But of course it can go the other way.
However, many of the tech startups are not operationally profitable and are unlikely to achieve sustainable profit ever.
They can still potentially produce a service or technology that is of value and ended up getting bought by another company.
Such as? Many would cite Uber and Lyft, but I actually think they can be profitable later. Right now car sharing is still building mindshare. Most are still not used to it. Similar to how online shopping was a novelty in the late 90s and early 00s. I used to have a coworker who insisted nobody would buy on Amazon if they have to pay sales tax. Like many here insist nobody would use Uber and Lyft if they don’t give riders discounts. Turns out people are willing to pay more for convenience and Amazon is more than doing fine today.
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They’re defining zombie company as earnings are less than interest payments. That’s horrifically bad.
That is survivor biased logic. Is AMZN the only e-commerce during dotcom era? AMZN is the one (more if include ebay or similar) that survive. Without the dotcom bust that kill other e-commerce businesses, thus leaving a big vacuum, could AMZN grow as large as now? Can it survive in that scenario? In the same vein, there could be a ride-sharing bust, killing most but DIDI 
dominating the global ride-sharing! One last thing, don’t forget can get AMZN for a pretty penny during dotcom bust, with this knowledge, still want to buy UBER and LFYT now?
My point is actually very simple. Saying a company has no hope to achieve sustainable profitability is a big call. Back in the dotcom days many companies didn’t even have revenue or business model to speak of. It’s easy to make those calls. Right now both Uber and Lyft are taking in billions in revenue. It’s just that they are spending more, thus the loss.
How can you be sure they don’t have any lever to raise revenue? How about raising prices? Running ads? Partnerships? There are hundreds of ways to explore.
Actually I wasn’t referring to them. In any case, survivors are likely to be random, hence impossible to assess which one, of course, you could be lucky to get the right one. More prudent to wait for the bust.
Both Lyft and Uber have already survived. I am sticking to these two as concrete examples. I like Uber much more than Lyft. It has the potential to own transportation as a category.
Amazon is not the only e-commerce that survived dotcom. Remember eBay?
Uber is already growing revenue less than 30% (it continues to decelerate) and lost $1.8B in 2018. You can find better growth rates and better profitability elsewhere.
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Does anyone care about
eBay?
Lyft is a cab company that looses money. Stock is in the toilet just like a cab company like Medallion Financial.
plenty of money to burn