The new-age company bet

Summary:  Many new-age companies draw investors with two traits: high operating leverage and low capital needs. This column explains how each works, using two imaginary companies to show how operating leverage magnifies profits when sales rise and losses when they fall.

Summary:  Many new-age companies draw investors with two traits: high operating leverage and low capital needs. This column explains how each works, using two imaginary companies to show how operating leverage magnifies profits when sales rise and losses when they fall. We have seen IPOs of many ‘new-age’ companies which have raised the eyebrows of many investors. Either they are just breaking even at ‘adjusted EBITDA’ levels, or they are offered at ‘nose-bleed’ valuations or both. I wish to talk about two aspects which make many such companies attractive. High operating leverage Operating leverage measures how a company’s profits respond to changes in sales. Companies with high fixed costs (rent, salaries) and low variable costs (ra

This article was originally published on November 01, 2026.