Like with everything else in the start-ups space failure too is glorified; so if a couple of start-ups capitulate and their employees find jobs elsewhere it’s called an ‘acquihire’. Never mind that it’s just a hyperlocal picking up 50 techies from a couple of dead start-ups, which never should have existed in the first place. It will make for front page news. But if TCS hires 75,000 people in a year and already has a workforce of nearly four lakh people, that gets buried somewhere.
Start-ups today are sexy, they’re all about youngsters hungry for fame and fortune or even notoriety; their victory is in the valuations, in the serial rounds of funding. Never mind that there’s no bottom-line – or even a top line in some cases – hope that it will all be there someday, in the not too distant future, is all it takes for PE players to loosen their purse strings. That explains the millions of dollars pouring into e-retailers, hyper locals, wallets and hundreds of other e-commerce ventures. And the hundreds of starry-eyed youngsters wanting to be part of the ecosystem.
But there’s the sobering side too captured by the incidents at TinyOwl, a food ordering app, whose employees found one fine morning, they were without jobs. Enraged, they took a couple of co-founders captive and it was only after the promoters committed to clearing all dues that they were let off. It’s hard to figure out what the truth is – did promoters not deliver what they had promised or did the employees demand more than what was due – but anyone joining a start-up must know that it’s not as safe it might seem even though founders have lots of money to spend.
At some point, if the business isn’t shaping up as it should and targets aren’t being met investors will run out of patience and the promoters out of money. The Zomato chief recently wrote a long letter to employees pointing out how sales targets weren’t being met. That’s what ostensibly happened with TinyOwl too prompting the management to announce last Tuesday it would be laying off more than 100 employees across four cities. So CEOs will be asked to leave and maybe even the entire top team and other employees. Jabong, for instance, has seen an exodus of top executives over the last year and there’s a new team in place.
The chances of things not going according to plan are high and, therefore, churn is going to become more commonplace. And while pink slips are not unheard of in the Indian context – private sector companies do fire employees – there’ll probably be a lot more of it in the start-ups world. Indeed, TinyOwl is not the first start-up to be scaling back operations – Townrush and Spoonjoy and several others have shut shop. But there have been very few failures so far and these haven’t been publicised. The stories in the newspapers are all about bullish investors, stratospheric valuations and, of course, the founders many of whom have achieved a status their counterparts in industry still haven’t.
But start-ups are an exciting place to be, which is why the focus has been on how the people that run these companies and how fast they’re growing. There’s been little discussion on how viable the business models are and what happens if there aren’t enough paying customers to support the costs by the time the initial investment has been exhausted. Not every e-commerce player is an Amazon with pockets deep enough to cover the large losses that pile up in the beginning. And not every idea is a sound one. But, if one is willing to live with some uncertainty, it can be a terrific learning experience and rewarding too.
Because there are lots of ideas that are both wonderful and workable; any business for instance that makes life more convenient for people, at a reasonable cost, should be scalable. So hyper locals, for instance, are a useful service and several of these will survive simply because the core proposition – of delivering a range of goods – already exists, albeit in an unorganised manner. It’s the challenge of putting in place a proper structure and charging customers the right price. After a point customers would be willing to pay a premium for the service, rather than expecting a discount, because it saves time and energy – both more precious now than money.