When Losing Money Is Strategic - and When It Isn't

A bike-sharing company called Ofo experienced rapid growth but eventually went out of business due to stiff competition and cash flow stress. The article discusses the importance of analyzing unit economics to determine whether losses are healthy or unhealthy for a startup. Healthy losses occur when a business model anticipates both creating and capturing value, and losses are expected to be offset by future growth and scale. Unhealthy losses occur when a business model is fundamentally flawed and fails to capture value, making it unlikely that scale will convert losses into profits. The article emphasizes the significance of unit economics in determining the profitability of a venture.