The start-up industry in India is akin to a reality show — it is has strong personalities (including a few hot-headed ones who often clash), and unpredictable twists and turns. It makes for compelling viewing.
The latest is the kidnap episode in TinyOwl, the food ordering start-up. Unhappy with one of the co-founder’s explanation regarding job cuts, employees in the company’s Pune office held Gaurav Choudhary hostage for two whole days. Choudhary couldn’t promise an immediate payment of salary dues and his colleagues weren’t too happy about that. This was the company’s second round of layoffs this year, and brought down TinyOwl’s staff strength to 650 from about 1,000. The company was founded in 2014 by IIT-Bombay graduates.
Another start-up, Housing.com, founded by students of the premier institute, was in news this week for giving pink slips to around 200 employees. The company, whose founding CEO Rahul Yadav was shown the door after a tumultuous stint, had already sent off 600 employees earlier this year.
Zomato, the restaurant discovery portal with $1 billion-plus valuation, is also in the middle of a restructuring process. In October, it confirmed plans to cut 300 jobs, 10 per cent of its human resource.
An international trend
Internationally too, layoffs have become common. A host of big names such as Snapchat and Flipagram also announced cuts in their staff strength this year; even bigger players and start-up icons such as Twitter announced job cuts.
So is this the start of the burst of the bubble that many have been riding gleefully? This question is making headlines across the tech world.
Experts list a few signs of a bubble. Peter Cohan, who describes himself lucky to have made money in the dot-com bust, says that one sign of a bubble is when money-losing start-ups are overvalued. In India, there has been intense debate on the valuations that some of the start-up unicorns have got. And each one of them, including Flipkart, continues to lose money.
The second sign, Cohan adds , is when investors don’t mind the growing valuations and want a piece of the action at any cost. “When the dot-com bubble burst, everyone and their mother was investing in Internet stocks. The NASDAQ plunged — wiping out about $10 trillion in stock market value,” he says.
The same can be said about the herd mentality in the domestic market. And now, even the seasoned ones seem to be committing mistakes. This story talks about the ₹100 crore that TinyOwl raised in February. Some of the comments of its investors now sound comical. One of them says: “We believe there will be significant value creation in online food ordering in India, and a mobile-first approach is the way to win in the space. We believe in the TinyOwl team’s vision, their product and their ability to execute at a pan-India level, and are excited to partner with them on their journey to create a large company.”
Not a bubble?
But this blogger contends that this is just the start of the ‘Euphoria stage’, that will lead to new trillion dollar companies. He goads, “The bubble isn’t coming, go back and build massive companies.” Other proponents of the thought believe that structural adjustments and a few failures are part of a new and growing economy.
But comparisons with the dot-com bust are inevitable. There is a major difference though. During the dot-com bubble, many of the companies were listed and had hundreds and thousands of shareholders, all of whom suffered when the bubble burst. In India, the present scenario is different. Even the darlings such as Flipkart and SnapDeal have a year to go before they go in for an initial public offering. So a bust now will hurt the investor community.
The biggest losers would be employees. And that is why, it looks like at least some part of the start-up industry is going bust with the numerous rounds of layoffs.