Start-ups yearn for handholding to tide over growth pangs
Until three years ago, keying “Indian start-ups” on search engine Google would show results such as “50 coolest start-ups to watch out for”, “Indian start-up investment increases by 300 per cent”, “IITs roll out the red carpet for start-ups”, and so on.
Cut to 2017, the narrative has completely changed. The same words now pop up results such as “Founder of The Viral Fever, accused of sexual harassment”, “Askme shuts down, lays off 4,000 employees”, “Spat at ShopClues spills from bedroom to boardroom”, “Stayzilla co-founder behind bars”. It seems that the erstwhile “rock stars” of the start-up world are buckling under their own stardom.
According to industry experts, start-ups are finding it hard to get out of this murky situation and blame lack of experience as well as dearth of good crisis managers for this. Many believe these new-age contenders should take tips from old-economy players, who have faced storms and are still standing to tell the tale.
For start-ups, the latter part of 2015 and 2016 were particularly bad. As many as 60 big and small start-ups shut shop, around 12,000 people directly or indirectly recruited by these companies got laid off and a string of controversies marred the sector.
In November 2015, Mumbai-based food ordering app TinyOwl faced the ire of employees when most were laid off, allegedly without prior notice.
Employees allegedly took the law into their own hands and held one of the co-founders, Gaurav Choudhary, hostage till they received confirmation on their settlements. Finally, the police had to intervene and settle the situation.
Facing severe cash crunch, consumer internet search platform AskMe in August last year shut down operations and laid off 4,000 employees. According to former employees, most had not been paid for two months before the shutdown and came to know about it at the last moment.
The country’s most celebrated unicorns, too, had their share of lay-offs and rapid senior exits.
Online marketplace biggie Snapdeal in the last one year laid off more than a third of its 10,000-strong workforce, Flipkart let go of around 700 of employees, all allegedly on the basis of performance appraisals, E-grocer Grofers laid off 10 per cent of its workforce in June 2016, Ola shut down TaxiForSure, which it had acquired in 2015, leaving 400700 employees in the lurch.
In all these cases, companies faced a severe blowback and loss of goodwill. “When it comes to traditional companies, they have years of experience in handling crisis, which is not the case with these young companies run by equally young men. While many of these start-ups initially hired senior talent, many eventually quit, leaving them with a dearth of crisis managers,” said Amarjeet Singh, Partner – Tax, KPMG in India.
Viresh Oberoi, chairman of the National Committee on ecommerce at the Confederation of Indian Industry, echoed the sentiment, saying, “Crisis managers are definitely needed. It is just not enough to have money and good operations. They need good seasoned people to handle situations.”
Sometimes the nature of these young start-ups also detracts from the great work they do. The first reaction of the online digital entertainment start-up TVF when its founder Arunabh Kumar was accused of sexual harassment by multiple women was to issue a threat.
In a statement, the company threatened that severe justice would be meted out to the ones making false allegations. Kumar even went a step further and justified his alleged actions in an interview. “I am a heterosexual, single man and when I find a woman sexy, I tell her she’s sexy. I compliment women. Is that wrong?”
Compared to that, in 2002, Phaneesh Murthy, one of the youngest directors at Infosys, was forced to quit following a sexual harassment lawsuit.
Yogendra Vasupal, the cofounder of Stayzilla, an online home-stay aggregator, was arrested for alleged fraud. The company recently called it quits to apparently reboot operations after its business failed to take off even after 12 years of operations. Jigsaw Advertising, a media agency, claimed Stayzilla owed it money, accused Vasupal and cofounder Sachit Singhi of fraud and filed a criminal case against them, leading to the arrest.
Many experts believe in the pre-digitisation era, handling crisis was easier as the flow of information from the company to the outside world was controlled.
“The old economy in the pre-digitisation age could contain leaks and scandals. However, the environment has drastically changed now. Crisis management is much more difficult if one does not react fast. I do not think start-ups are fully equipped to handle a crisis at present,” said Samit Sinha, managing director, Alchemist Brand Consulting.