No one should be surprised about job cuts at Jasper Infotech Pvt’s Snapdeal. The Indian media have chronicled the struggles facing the country’s e-commerce industry, including executive departures and lower equity valuations, and I foreshadowed trouble back in July in looking at rescinded job offers for college students. Shining a light on these valuation hiccups and stumbles is important for investors, partners, employees and customers.
Job cuts deserve just as much attention, because there’s little good in hiring a whole lot of people before firing many of them. Seasoned venture capitalists advise startup executives that it’s better to control growth than to expand too quickly. While you’ll arrive at the same headcount in the end, the disruption and damage to morale is taxing.
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Rationality doesn’t always win, though, as we’ve seen in Silicon Valley with a funding arms race among sharing-economy startups like Uber Technologies Inc., Lyft Inc. and AirBnb Inc. There’s another way to look at the situation. It’s important to remember that the primary goal of a startup’s executive team isn’t to maintain headcount or prop up equity valuations — it’s survival.
Starting a new company from scratch is a risky business. Far more fail than succeed. After raising billions of dollars at home and abroad, Indian startups are struggling to turn the country’s growing e-commerce industry into profits, forcing some investors to reassess their worth and prompting managers to cut costs. A Morgan Stanley mutual fund, for example, lowered its valuation of Flipkart Online Services Pvt by 38 percent in the September quarter.
Online retail, electronic payments and ride-sharing are here to stay, so despite all the pain and disruption the only real question is which companies will hang around and which won’t. We already know that it’s not necessarily the biggest and strongest that survive, but those most adaptable to change. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.