Sen­si­ble Hu­mil­ity From a Uni­corn

Snapdeal is right to at­tempt a course cor­rec­tion

The Economic Times - - The Edit Page Ict Trade -

Snapdeal has done it­self and the en­tire startup ecosys­tem a big favour by ad­mit­ting over­reach and tak­ing de­ci­sive ac­tion to down­size. Companies that are given oo­dles of cap­i­tal and a vari­able burn rate rather than a tar­get rate of re­turn within a rea­son­able time hori­zon run the risk of not know­ing when to take the foot off the pedal, slow down and change course. It is wel­come that Snapdeal has ex­tri­cated it­self from a spend­ing spree that was not tak­ing it any­where in par­tic­u­lar.

It is to be hoped that other In­dian star­tups, too, would learn sim­i­lar lessons and emerge from the delu­sion that sub­si­dis­ing cus­tomers in the name of cus­tomer ac­qui­si­tion will take them to busi­ness nir­vana. It is a les­son, too, for in­vestors who take the ‘spray and pray’ ap­proach to in­vest­ing in star­tups. Should we com­mend the founders for their de­ci­sion to take a100% pay cut? Well, it is a to­ken of em­pa­thy for the staff los­ing their jobs or in line for a se­ri­ous drop in their salary. It is a wel­come show of de­cency. What about the 600 or so em­ploy­ees who would re­port­edly have to go? Join­ing a startup is al­ways a risk, for which you ex­pect to re­ceive a pre­mium in cash and/or kind: you get high salaries and/or ex­pe­ri­ence of a kind that you would not in an es­tab­lished com­pany. Pre­sum­ably, those who joined the startup came in with their eyes wide open. They would leave richer for their ex­pe­ri­ence, if not for high salaries. Even if a par­tic­u­lar e-com­merce com­pany is not ex­pand­ing fast, the in­dus­try in gen­eral would, par­tic­u­larly if the gov­ern­ment goes ahead with the re­ported re­lax­ation of in­vest­ment con­di­tion­al­ity, and should be able to ab­sorb ex­pe­ri­enced hands.

It is im­por­tant that in­vestors and cus­tomers do not draw the ex­treme con­clu­sions about ei­ther Snapdeal or In­dian star­tups in gen­eral. In­dia has enor­mous po­ten­tial in wide-rang­ing com­mer­cial pos­si­bil­i­ties wait­ing to be ex­plored and de­vel­oped. That would call for large doses of risk cap­i­tal. How much is needed in any par­tic­u­lar line of ac­tiv­ity and how much would lead to ex­cess is some­thing that in­vestors need to have a sense about.

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