Snapdeal and Bahl's confession: There's a silver lining in the grim email

Snapdeal's founders told the employees - they want to make the company 'entrepreneurial'

There is a silver lining in the grim email Snapdeal's founders sent to employees on Wednesday: they want to make the company "entrepreneurial". That is the ingredient that had gone out of most Indian startups.

Two years ago, while researching and reporting for a book about modern technology startups in India, I asked a large number of people if Indian e-commerce companies had stopped trying to do new, interesting, innovating things. Wasn't cash-on-delivery their last big innovation?

The reasons was a lot of rude stares. Those were the days when Flipkart was blazing a trail of high valuations. A funding round of $100 million had become so commonplaces it seldom made it to the front page. "Hey," people chastened me, "funding raising is an art, which we have perfected."

Maybe fundraising can be a fickle art. Those dizzy valuations were being driven by venture capital, which is a double-edged sword. Saras Sarasvathy, professor at the Darden School of Business, University of Virginia, invokes nails and coffins when taking of VC money.

“The probability of you succeeding after getting VC money is low. And – the biggest nail in the coffin – suppose you get the VC money and you succeed, the probability that you will still be CEO is 50 percent of that,” Sarasvathy said in an interview earlier this month to Tech in Asia.

Successful companies get their money from customers. But most of our startups spend more time preparing power point presentations that will floor a VC, not talking to customers and solving their problems. Before they have a paying customer, they look for paying VCs. Some go after VCs even before building their product.

But VCs are investors, out to make good bets, safe bets, and hedge their bets. So you would find a VC investing in half a dozen startups that deliver grocery. In doing that, they are being good VCs. But in chasing them, you are not being a good entrepreneur.

Snapdeal founder Kunal Bahl's email to employees reads almost like a confession. "...a large amount of capital with ambition can be a potent mix that drives a company to defocus from its core. We feel that happened to us." 

A good entrepreneur cares about customers and tries to solve their problems, which is how Uber and Amazon came up. As did Microsoft. It is difficult to think of it as a startup now, but Bill Gates built his company in the initial phase with money from IBM, which liked his software and was happy to pay for it.

On the other hand, if you only try to replicate a model that has succeeded elsewhere, you end up being a "me-too" version of the original. Few Indian startups, with honourable exceptions such as data science company Mu Sigma, can claim to be truly original. And a "me-too" version's worst nightmare is that the "me", the original, comes to play in the same market. Especially if the market happens to be largely open, such as India.

Me-toos can flourish in China, where you have to be on the right side of the Politburo to succeed at anything, and Russia, where you ought to be on right side of Putin. India, for all its quirks, embraces all kinds.

The nightmare came true for Indian e-commerce start-ups when Amazon came in. To make things worse, while our e-commerce companies were busy replicating Amazon, the original had moved several notches above. And that is because Amazon does not think of itself as an e-commerce company, it visualises itself as a technology company.

That is not a hollow claim -- Amazon is among Fast Company's and Forbes magazine's list of most innovative companies for 2016. It's streaming services for movies, music, audio books, and games are counted among the best. It makes Emmy-winning TV shows. Amazon Web Services has become a $13 billion business that powers Airbnb and Netflix. It is dabbling in artificial intelligence with Alexa.

Add to all that founder Jeff Bezos' legendary focus on the customer. A remarkable nugget that merged in the last festival season was that Amazon Prime -- a service, not a product -- was one of the largest selling items.

So forgive me for not envying Flipkart and Snapdeal. What are their weapons against Amazon? They can't match it on capital and certainly can't on technology. And it does not help that the Indian companies have stopped innovating. In addition, they have come to face the classic start-up problem of managing relations with investors.

The entrepreneur-investor relationships is, at best, a tricky one. The entrepreneur is of a breed that dreams of changing the world. The investor wants to make money. They are both right in their own way, and one can hardly flourish without the other. But, inevitably, they clash when the chips go down. And the winner of this clash is often the one with the largest holding. Now, few Indian entrepreneurs, with the possible exception of Paytm's Vijay Shekhar Sharma, can boast of equity holdings in double digits.

Look around. You can dismiss Rahul Yadav of Housing.com as an enfant terrible. He is now out in the wilderness, though he had brains, and verve, and could have done things with the right kind of managing. Housing, in the short period that Yadav was there, did force the incumbents to change their ways.

Elsewhere, Flipkart's founders are no longer running the company. Kalyan Krishnamurthy, a nominee of the largest investor, Tiger Global, is the CEO. Snapdeal's founders are taking a 100 per cent pay cut and laying off some 600 people. Food delivery companies are in a shambles -- Swiggy ads have proliferated on hoardings, but one has to look deeper for a real resurgence. Ola had a head-start against Uber, but, if you want to crack up a cocktail party, tell them it is going to do a Didi Chuxing and buy Uber in India.