The Silent Killer: How Poor Unit Economics Destroy Promising Startups | Quick ₹eads

by Karnivesh | 30 December 2025

The Question No One Asks Until It's Too Late

A startup founder celebrates hitting 1 million users. Investors are thrilled. The press writes glowing profiles. But one question haunts, "How much money does this startup make per user?"

This is unit economics. And it separates startups that became billion-dollar companies from startups that became cautionary tales.

Unit economics strips away the noise valuation hype, growth rates, user counts and asks a brutally simple question: On a per-unit basis (per customer, per order, per transaction), is the business profitable? If each customer costs ₹100 to acquire but only generates ₹80 in lifetime value, you're not scaling a business. You're accelerating towards bankruptcy.

"Growth without unit economics is a Ponzi scheme. Growth with solid unit economics is a business."

The Magic Ratio: LTV vs. CAC

The core metric in unit economics is deceptively simple:

LTV (Lifetime Value) = Total revenue a customer generates over their entire relationship

CAC (Customer Acquisition Cost) = Total cost to acquire that customer

The benchmark? LTV should be at least 3 times CAC (3:1 ratio).​

If Zerodha spends ₹100 to acquire a trader, that trader should generate ₹300 in lifetime value. At 3:1, the company breaks even on acquisition costs and has margin left for operations and profit.

But Zerodha's actual LTV:CAC ratio? Around 8.5:1. For every rupee spent acquiring a customer, they make ₹8.50 in lifetime value. That's exceptional.​

Why does this matter? Because it tells you whether a startup is truly profitable or just burning investor cash. Uber had incredible growth but horrific unit economics for years. Zerodha had modest growth but exceptional unit economics.

The Fintech Story: Zerodha's Unfair Advantage

Zerodha entered the Indian stock trading market with a radical idea: ₹20 flat fee per trade, regardless of size. When brokers charged 0.5-1% per trade, this was suicide.​

Until it wasn't.

Here's the unit economics magic: Zerodha's CAC is low because of word-of-mouth and educational content. They created Varsity (an education app) and YouTube channels with 1.4 million subscribers. Most new customers came free. And their LTV is enormous because each trader generates consistent fees ₹20 per trade, and active traders execute dozens of trades monthly.​

A trader executing 100 trades annually pays ₹2,000 in brokerage. Over 10 years? ₹20,000. For minimal acquisition cost.

By FY 2024, Zerodha generated ₹8,320 Crore in revenue and ₹4,700 Crore in profit a 56% net margin. The entire business model hinged on understanding unit economics: "If we make each customer incredibly valuable, the model works."​

The CAC Payback Period: When Do You Get Your Money Back?

Unit economics also track CAC Payback Period how long until the revenue from a customer recovers their acquisition cost.

For SaaS companies, a 12-15 month payback period is healthy. For Zerodha, it's likely 2-3 months (low CAC, high monthly revenue per user).​

Why does this matter? It determines how fast you can reinvest in growth.

If you break even on a customer in 3 months, you can spend those freed-up profits on acquiring 10 more customers. Reinvestment accelerates. If you break even in 24 months, you're stuck. Most startups run out of cash before payback completes.

For usage-based SaaS (like Razorpay), payback is trickier because revenue doesn't arrive evenly. Customers start small and expand as they use more. But the principle remains: if payback stretches beyond 18 months, growth becomes capital-intensive and risky.​

The Quick Commerce Trap: Volume Over Profit

Now look at the opposite story: Swiggy Instamart.

Instamart delivers groceries in 10 minutes. It's convenient. Customers love it. But the unit economics are brutal.

CAC: High. Swiggy spends heavily on discounts and marketing to acquire customers. A ₹500 discount to first-time users costs real cash.​

LTV: Complicated. A customer might order twice a week for ₹200-300 per order. Instamart's gross margin on those sales is roughly 15-20%. Do the math: ₹250 order value × 15% margin × 100 orders per year = ₹3,750 annual contribution per customer.

Over 3 years (average customer lifetime)? Maybe ₹11,250. But the acquisition cost? Likely ₹5,000-7,000.

The LTV:CAC ratio is around 1.8:1 below the healthy 3:1 benchmark. This means Instamart is losing money per unit. The only way forward is massive scale to absorb fixed costs (dark store rent, logistics, tech).​

Notes that Instamart needs over 2,000 orders per day per store to break even. This is brutal it means every dark store must serve a dense neighborhood with habit-forming customers. If order density drops? The unit economics collapse.​

The Dunzo Collapse: When Growth Hides Broken Economics

Dunzo is perhaps the starkest cautionary tale. Once valued at $200 million, the hyperlocal delivery startup promised to deliver anything groceries, documents, flowers in 30 minutes.

But unit economics were broken from day one.

In FY 2020, Dunzo's delivery partner expenses grew 2.2X to $20.48 Million, while revenue was only $9.91 Million. Customer acquisition and discounts spiked 2.7X to $9.68 Million. The company burned through capital with reckless abandon.​

The fatal mistake? Dunzo pivoted to quick commerce (groceries in 19 minutes), opening 130+ dark stores. This required massive capital investment and created unsustainable unit economics. Each grocery order had razor-thin margins, and the speed required (19-minute delivery) meant logistics costs were astronomical.​

Delayed salary payments to employees, strained vendor relationships, and impossible growth targets followed. By 2023, Dunzo had effectively shut down, a once-promising startup killed by broken unit economics.​

The lesson? Speed and growth mask broken unit economics until they don't.

The Ola Electric Paradox: When Unit Economics Finally Click

Ola Electric offers a contrasting story. The company struggled with negative unit economics for years, burning cash on every scooter sold.

But in Q2 FY26 (Oct-Dec 2025), Ola achieved its first profitable quarter with positive EBITDA of 0.3%. How?​

Gross margins expanded to 30.7% among the highest in two-wheeler manufacturing. Operating expenses fell 52% to ₹258 Crore. The company focused on cost discipline instead of chasing scale.​

By Q4, Ola projects auto gross margins around 40% and segment EBITDA of 5%. Each scooter sold is becoming a profitable unit.​

This is the payoff: if you survive long enough to fix unit economics, scale becomes profitable.

The Unit Economics Spectrum: How Different Startups Stack Up Against the 3:1 Benchmark

The Scorecard

When evaluating a startup, ask:

1. What is the LTV:CAC ratio? Above 3:1 is healthy. Below 2:1 is dangerous.

2. How much of LTV is accounting tricks? Instamart's LTV calculation includes future orders, but what if customer retention drops 50%?

3. What drives CAC? Word-of-mouth (good, like Zerodha) or paid ads (expensive, like Instamart)?

4. Is the payback period reasonable? 12 months for SaaS, 3-6 months for high-frequency businesses like Zerodha.​

5. What happens at scale? Does gross margin improve (good) or worsen (bad)? Ola improved. Dunzo worsened.

The Final Truth

Zerodha proves that profitability scales with understanding unit economics. They didn't win because they grew fastest. They won because every customer they acquired was worth 8.5 times what they paid. That's the real competitive advantage.

Dunzo teaches the opposite lesson: impressive growth can mask deteriorating unit economics. More orders aren't victory if each order loses money.

Unit economics is where the hype meets reality. It's where founders stop dreaming and start calculating. And it's the difference between building a unicorn and joining a graveyard of failed startups.