Since its fumbled March IPO, Deliveroo’s price dissipated like our dreams to enjoy a proper summer vacation on a white sandy beach. Before dismissing this as another idiosyncratic event in the digital start-ups world including Uber and WeWork, it may be time to ask whether the repeated pattern can provide a few lessons that cut across these examples.

For quite a while, the valuation of digital startups have been based on the digital promise: enter with low price and high convenience, capture a large market share, understand the consumers better, deliver on scale (and reasonable margin), and the winner will take all. The concept is an attractive feed forward loop, i.e. Amazon growth flywheel, but the reality is much less simple. For example, even after reaching high penetration of the market, many ride-sharing digital platforms are still struggling to make sustainable profits, including Uber, Lyft, Didi, and Grab. In the e-commerce space, only turned profitable around 2017.

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