Suparna Goswami, Forbes
Bengaluru, 17 January 2017
past week saw India’s Flipkart appointing a non-founder CEO who is also
part of Tiger Global Management, the online marketplace’s largest
A few days later, Snapdeal, another large Indian
online marketplace, brought in real estate firm Housing.com’s CEO Jason
Kothari as its chief strategy and investment officer. This news comes
on the heels of a recent merger between Housing.com and real estate
brokerage firm Prop Tiger, which has raised funds from SoftBank – a
major investor in Snapdeal.
Are we seeing a pattern of investor overreach into startups in India?
this latest SoftBank connection, many are starting to lament how young
businesses in India are facing excessive interference from venture
capitalists. Some experts tracking the ecosystem have written about the
number of years left before “impatient investors take control of the
startups” – but how well founded are these suspicions? I spoke with a
few local venture capitalists for their side of the story, and perhaps
unsurprisingly, many were upset with the media for “sensationalizing” a
trend that’s not quite the harbinger it appears to be.
from Lightspeed India Partners Advisors, a VC firm, says things
shouldn’t be viewed as black and white. “Just because Flipkart
announced a professional CEO who happens to have an association with
its investor firm Tiger Global Management doesn’t mean [its] founders
no longer will have a say in the company,” says Khare.
end it all boils down to making money. If a company isn’t doing well,
the equity that VCs and founders jointly hold will have no value. I
don’t see this as a battle between VCs and founders,” he says.
other VCs, it’s all about the individual needs of a company, and
labelling the investor’s role as “interference” is the wrong way to
approach the issue.
Tarun Davda, managing partner with VC firm
Matrix Partners believes that all investors look out for the wellbeing
of their investment, no matter how that presents itself.
helpful when asked for advice but never fool ourselves into believing
that we know more about the business than the founders,” says Davda.
believes there are often cases where founders feel they can better
serve their company by bringing on a more experienced CEO, particularly
where founders may lack the experience or skills to take a company
ahead through all stages of evolution. Davda provides the example of
Google, probably the biggest startup success story of our generation,
which had to bring in Eric Schmidt as its CEO early in their journey.
Dutta, managing partner of venture accelerator PVC Partners, chalks up
the media reaction to local culture. Dutta says Indians have a habit of
looking down on founders for handing control over to an outsider.
is no harm in accepting that sometimes a company needs a new person at
the helm to turn around things,” says Dutta. “In India, we tend to take
these things as failures; but [they] could be the outcome of well
thought out strategic decisions.”
And in reality, for
many startups the Flipkart and Snapdeal episodes are a non-issue;
founders are aware of their capabilities and strengths, and their
Ganesh Shankar, founder of FluxGen Technologies, an
IoT startup, is fine to pass on the reins of the company to a person
who doesn’t alter the company culture too much. “I guess I [would] be
glad if I can find a person willing to take on the top leadership role
provided he or she has the experience to scale the business,” he says.
view it as a matter of practicality, that these seemingly hard
decisions are part of the fiduciary responsibility of the VCs towards
Pallav Pandey, CEO of startup BroEx, doesn’t believe
that VCs interfere in a company’s affairs unless they’re forced to.
“Both founders and investors are stakeholders and after having given
enough time to founders [to succeed], if it is inevitable that a new
CEO needs to be brought in to steer the company forward, then it should
be done,” he says.
However, not all agree with this view. One
startup founder I spoke with, who asked not to be named because of the
potential harm to his business’ relationships, says the reality of a
boardroom meeting is darker than what’s usually projected.
and VCs are fair-weather friends. One can’t expect things to be always
amicable. The main flip side of raising huge funds is that somewhere
down the line a founder’s opinion gets diluted. That’s a hard reality,”
the founder says.