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Many of the famous founders of Indian e-commerce companies are fast losing their halo, as marquee investors capture centre stage at the business.
With a growing appetite for returns and exit in a marked-down market, investors who poured billions of dollars into companies such as Flipkart, Snapdeal, Ola, Zivame and others are now in full control of the operations of several online majors.
According to experts, while founders such as Sachin Bansal, Binny Bansal of Flipkart, Kunal Bahl and Rohit Bansal of Snapdeal have all been celebrated as pioneers of the Indian e-commerce sector for long, it is the firms with money bags, whether in Silicon Valley or New York, Tokyo or Hong Kong, which are taking the core business decisions.
Consolidation in the sector, which has seen eBay India become a part of Flipkart and the proposed merger between Bengaluru-based firm’s merger with Snapdeal, is being handled by top executives from SoftBank, Tiger Global and eBay.
“It all boils down to who owns the largest percentage in the company. If investors hold more, they would be the ones calling the shots,” said Sandeep Aggarwal, founder and chief executive officer (CEO), Droom.
Even as Flipkart and Snapdeal founders might have at times clashed on social media, the rivalry was not factored in when SoftBank, biggest investor in Snapdeal, decided to sell the firm to Tiger Global, one of the biggest investors in Flipkart, a source said.
According to at least three persons close to the board of Snapdeal, founders Kunal Bahl and Rohit Bansal, who together hold only 6.5 per cent stake in the company, are mere spectators now, as executives at SoftBank are taking all the calls.
“SoftBank holds 33 per cent stake in the company, while the founders hold just 6.5 percent combined. Right now all they are trying to do is get a good deal for them, as well as the employees who were given employee stock options,” said a source close to the board.
In a letter to employees, Bahl indicated he was ‘requesting’ the board to not leave his team in the lurch.
Experts believe investors have been calling the shots for some time now. This is because investors saw that even after multiple funding rounds, founders were not able to improve either the top line or bottom line.
“After two to three rounds of funding, if the business is still not performing, investors had to step in. This is going to be the trend, going forward,” said Arvind Singhal, chairman and managing director, Technopak.
Things are not different down south in Bengaluru, home to Flipkart. Tiger Global, which owns close to 35 per cent in the company, has been at the centre of many decisions in the company. Last January, when Binny Bansal became the CEO, replacing Sachin Bansal, it was largely seen as a move to show to investors Flipkart’s seriousness to take on Amazon.
However, exactly a year later, Tiger’s go-to ‘turnaround man’, Kalyan Krishnamurthy, was brought in as CEO. It was only after that did the company manage to orchestrate the $1.4-billion funding round and the merger with eBay.
Giving the reins to professional CEOs is a time-tested way in the Silicon Valley to ensure a company performs.
Back home, another online company — Zivame — recently witnessed a lot of churn. Former CEO-Founder Richa Kar gave her resignation to the board in February even as the company pivoted to a marketplace model. The investors, which include Zodius Technology Fund and Khazanah Nasional Berhad, investment holding arm of the Malaysian government, reportedly said the founders were not able to handle the pressures of running a multiple shareholder-held company.
According to recent media reports, the investors in Zivame found running the company via a person appointed by the board much better than founders who might not be able to handle the demands of investors and shareholders.
