 "Image via shutterstock.com")
There have been a slew of layoffs in the recent past in the start-up space. It started with TinyOwl firing people in September after it had hired too many in the wrong vertical and then Zomato dismissing 'non-performing' employees. Thereafter, TinyOwl once again fired employees to stem an escalating burn rate. Now, there are reports saying Housing will lay off 200 people after venture capital (VC) firms turned them down for further funding owing to high burn rate.
Others, too, have scaled back hiring plans and more pink slips are likely to be handed out, say VCs. Competitors have refrained from commenting. The events, they say, are "too real".
The usual backlash means the blame is passed to the founders for mismanagement. One of the employees, whose job was made redundant recently by a food tech company, said the 20-somethings running the company were straight out of college and very rarely knew what the real world was like.
"It is difficult to imagine how companies with almost no revenue go on an expansion spree with money that will last barely a quarter," said the chief operating officer of an e-commerce company. "It is almost impossible to raise money within three months now. Eighteen months ago, you could raise money within a month. There has to be some accountability."
The fund flow drying up comes not only because inflated spends and questionable business practices but also due to external factors such as a correction in China.
"In China, private market valuations have shot up… So public market assets are dirt cheap and no one wants to touch private assets and especially the $100-million deals in China have literally shut down. If you notice in the past six to eight months, hardly any investments have happened in assets in China," said Sasha Mirchandani, founder and managing director, Kae Capital.
However, experts argue that despite economic factors, investors are to blame as well. "These investors have been turning the spigot on and off. This forces the founders to come up with solutions on the fly," said the Chief executive officer (CEO) of a capital-raising platform.
What is needed, some VCs say, is a mentorship programme, which is similar to the ones used by angel investors.
"We have four buckets of mentors - industry experts, retired professionals, failed entrepreneurs and professional talent looking for new challenges," said Vikram Gupta, CEO and founder, IvyCap Ventures, a Mumbai-based early-stage VC company. The VC firm insists that all its companies need to understand the importance of mentors and therefore should have them on board with mutual decision on specific mentors. "Most of the entrepreneurs have ideas and passion but may be lacking skills in certain areas including marketing, finance or domain expertise, which is where mentors step in," he added. The company appoints mentors irrespective of the age of the entrepreneur, suggesting that everybody needs help.
Binoy Khimji, part of the Mumbai Angels Network, tends to agree partly with Gupta's solution.
"There is definitely a need to get mentors or advisors with domain experience in the company. Plenty of these companies have a big canvas and inability to execute with the capital that they have; that is where a mentor is needed," he said.
Serial entrepreneur K Ganesh, who sold his stake in online education company Tutorvista to Pearson in 2013, said even though mentors or executive coaches are needed, there needs to be a little perspective to the recent turmoil. "In India, now there are never going to be jobs for life. There will be aggressive hires and large layoffs, we will have to get used to that. Every company has gone through a cycle where it needs to let people go. How and when you let people go is where the expertise is needed," said Ganesh.
He argued the need for independent board members and honorary advisors has never been stronger.
"Someone with 20 years of domain experience will tell you, 'don't fire when festivals are around the corner'; it's better to tell employees, informally, that they'll need to start looking for a job." There is a need to be more humane while being pragmatic; else, public relations disasters will keep occurring.
| PINK-SLIP PHENOMENON |
THE REALITY
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