Though leading engineering and management schools like some of the IITs and the IIMs are getting leery of giving start-ups the kind of pride of place they did in their recruitment calendar – ISB is the latest to join this group – both they and their students would do well to recalibrate their expectations keeping in mind just what a start-up entails. Fuelled by freely available VC funding, start-ups like Flipkart went on a binge, gave too many discounts to virtually buy their customers and spent too much to attract top talent. In the initial years, it worked well – customers flocked to etailers and they were the hottest place to work. As the losses mounted, the model began to fall apart – a study by Kotak Institutional Equities showed that combined revenues for a clutch of 22 e-commerce players grew 191% in FY15 while their total losses jumped 264% to Rs 7,900 crore. As a result, investors began marking down their investments – Flipkart’s valuation is down to $9.3 billion compared with $15 billion in June 2015, when Tiger Global invested $700 million in it. Not surprising then, that private equity and venture capital firms infused just $1.15 billion in the three months to March, a good 24% lower than that seen in the December 2015 quarter which itself had seen investments drop by 48% over that in the September quarter, a study by KPMG and CB Insights showed.
While startups still have to pay a higher salary to attract talent, not surprisingly, many are not able to meet their commitments to students, which is what the IIT/IIM/ISB ire is all about. With startups sharply cutting costs, lowering discounts and pulling back from many locations, it is only natural that this has to extend to their staff as well. It is this that IIT/IIM/ISB and their students need to adjust to. A start-up, by definition, is a place where people join because they’re excited by a new idea, the possibility of coming up with innovative solutions, blue-sky thinking, a place where the lack of a formal organizational structure forces graduates to look at every aspect of a business and gives them the kind of learning no other organization can possibly give them. If it is only the fancy start-up salaries that attract graduates, these firms would do better to move on to the next level of management/engineering institutions where students have fire in their belly, not just money in their eyes.