For those familiar with start-ups and their investment pitches, the recent call arranged by Zee reminded one uncannily of them. A bright young mind pitched the concept and painted a picture of the potential for the business —using big picture numbers and some logical assumptions. However, like with most start-ups, the potential is no assurance of achievement. And this is where the discomfort of investors in Zee stems from.

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True, cash flows are of utmost importance at a time of liquidity stress, but the bigger worry is whether the money flowing out of the company is being deployed judiciously. It is here that having an independent, credible private equity co-investor would have helped. It would have ensured an independent endorsement of the business potential and the expected returns on the money being pumped in.

This is especially relevant at a time when digital communications is a high focus area for several companies, not just in India but across the world. This implies a highly competitive environment and high probability of alternate technologies emerging even before SugarBox gets to its break-even in 5-years. Could any such development cause a shift in business, or at least impact potential revenues, and therefore upset the return calculations.

The other worry is of adequate oversight on cost control, as start-ups are known to be prodigal. Will the presence of a more cost-conscious, traditional business group parent ensure thrift? That’s a question no one has ready answers to.

And finally, any investor in start-ups and early-stage companies will tell you that they never have only a few eggs in their basket, and they bet on, maybe, one out of 10 bets making it good. Even if we adjust the odds given the presence of a long-established parent, assuming 100 percent success would be way off the charts. And therein lies the rub. The money flowing out may not come back at all or could payback multifold. The risk in this wager, though a key facet of the entrepreneurial spirit, tends to unsettle risk-averse investors looking for more stable returns on investment.