False Starts and Second Guesses

ON 22 MARCH, Saiyad Faraz Ashraf took the Delhi Metro as usual from Malviya Nagar to his office in Gurgaon. He was worried, but apparently not enough. He had got married just two months earlier—his wife was still studying in Gorakhpur—and it was time he applied for a car loan and found a bigger apartment. But the preceding weeks at work had been rocky. CommonFloor, the realty portal where he was employed as a senior research analyst for the past two-and-a-half years, had just given in to a distress sale to Quikr. Over a hundred employees had already been told they had no place in the restructured organisation. But he was a top performer, he reasoned with himself. He would retain his job. He had to. When the email came later that day, his worst fears rang true: an unceremonious exit, no severance pay, and a sense of doom that continues to haunt him two months later. Ashraf shut himself up for four days, not taking calls even from his wife and parents, lest his voice betray his state of mind. “I thought I would tell my family later, after regaining lost ground, but I haven’t yet managed to land a job. I don’t have an engineering background, so it is tough to get into good startups. And corporates in the real estate sector won’t hire now, the market being at a low. I am in a bind,” says the 28-year-old.

Call centre and entry-level analyst jobs that are increasingly being automated are typically the first to be axed in the event of a restructuring. With an MBA from a college in Lucknow and four years of experience in real estate analytics, Ashraf, at under Rs 5 lakh a year, was not an expensive asset. But when you are on a detox diet, you cannot afford to be lax. If Indian e-commerce startups pulled out all the stops to woo customers early last year, this year has been about rationalising headcount, curbing cash burn and thinking hard about long-term growth and sustainability. Many of them are course-correcting as investor interest declines and valuations plunge. Mid-tier startups that hired rapidly during the growth phase have been choked for funds this year.

Indian e-commerce bellwether Flipkart, which came under fire for deferring joining dates for fresh hires from IIM-A, has been devalued multiple times this year by Morgan Stanley and T Rowe Price (down from $15 billion last year to about $9.4 billion now). HSBC recently valued food discovery app Zomato at $500 million, which is half its value in September 2015, when it raised its latest round of funding. It has laid off about 300 people, or 15 per cent of its workforce. Food tech, hyperlocal delivery and online realty are among the worst-hit startup sectors, having witnessed a lot of churn, low traction and bad decisions, including unplanned hiring at bloated salaries and obscene spends on office space. TinyOwl scaled back operations and reportedly laid off over 200. Foodpanda, a Rocket Internet-funded company, let go of some 300 employees. PepperTap, which was India’s third-largest e-grocer after Bigbasket and Grofers, folded, with the founders pleading guilty to spreading themselves too thin and offering unviable discounts to acquire customers.

STARTUPS ARE A bit like child prodigies looking for their place in the world. Nothing about them makes sense, and only a thin line separates a blunder from a visionary act. Their potential for disruption may well command the fascination of the modern world, but there is also a besetting vulnerability to such creatures, even as they mask their fear and weakness behind a veneer of premature accomplishment. Add to the mix the collapse of the binaries of profit and loss in venture capitalist culture, and it makes for one heady career cocktail. When a sliver of the IT and corporate workforce joined some of India’s most hyped startups to feed off their energy—and their VC money-lined pockets— some found themselves trapped. They have been reminded that like children, prodigies and otherwise, startups can be both richly rewarding and incredibly cruel and greedy. If they came for the wrong reasons—for ESOPs or because it was the cool thing to do—they are likely regretting leaving their respective industries to ride the startup rodeo, only to fall off their horse too soon. “This is the Wild West. You’d better know what you are getting into,” says a former startup executive who is mulling a venture of his own.

“I am done with startups,” announces 26-year-old Abhishek Shah, an MBA who spent three-and-a-half years hopping from one untenable startup job to another—from personal genomics startup Mapmygenome to TaxiForSure, which was forced to merge with Ola, to TinyOwl, acquired last week by Roadrunnr in a bid to compete with Swiggy and Zomato. It has been eight months since Shah moved to Ahmedabad as strategy head for three business lines at leading fabric manufacturer Arvind Ltd, an 85-year-old company. “Had I spent three more years in the startup world, no corporate would have touched me. Very few established companies appreciate what working for a startup can teach you. Fortunately for me, I found the right fit, but I know many who are struggling to make the switch back to a corporate,” he says. Taxi ForSure, Shah says, was a rare “ethical” startup. “They considered it their moral responsibility to not fire anyone,” he says. When Ola acquired the company early last year, many employees quit, unable to reconcile to the work culture changing overnight. Leaving TinyOwl, on the other hand, was a no-brainer, says Shah. Losses were mounting, salary costs spiralling out of control and revenue wasn’t keeping pace. The yearly rent for its plush office space in Powai, Mumbai, in his estimate, could have paid the salaries of the entire call centre team.

Overpaying to attract pedigreed talent has dragged many a bottom line down, with salaries now accounting for 35-40 per cent of the cost of running an e-commerce startup in India. Whispered stories of ill-advised hiring and firing now swirl like snow in a shaken globe. At one taxi aggregator, the executives picked a Rs 85 lakh-a-year IIM graduate over a Rs 22 lakh charismatic salesman for the post of head of alliances because they “could not afford to go wrong”. The chosen one did not last long, reluctant as he was to do the necessary legwork for negotiating alliances with restaurants and mobile wallets. Often, it is because startups are afraid of making mistakes that they make these mistakes. At Housing. com, the SoftBank-backed almost-unicorn whose fall from grace heralded a period of investor wariness, even as the company was running out of cash, hiring went on. At 2,000-plus employees, it was already a behemoth when Vinay (name changed on request) joined the company in mid-2015. After a year of working for a multinational business consultancy, Vinay, a lapsed engineer, had wanted to “switch gears and change streams”. He joined Housing as a software developer at a handsome salary, but quickly realised the company was grinding to a halt. The first round of layoffs came in November. “This decided it for me. I couldn’t have joined another startup after Housing. I decided on a Masters in Computer Science.”

Many ex-employees say they have done some soul-searching in the past few months about their own motives for joining a startup, dealing with the consequences of a layoff, and the way forward at a time when the sector is in consolidation mode. Most say it was an unparalleled learning experience that allowed them to quickly upskill and draw higher compensation. “Some time in the past two-three years, a startup job came to be regarded as a safe bet. It is anything but that. The ESOPs aren’t worth it. Work pressure at a startup is a hanging sword. Expectation is like a big kuaan (well) that never fills up,” says a 28-year-old who resigned from Housing in the nick of time. “Headhunters would call and tell me to take a 20-per cent pay cut, since I was jumping from a failed startup,” he says. He recently joined a multinational PR agency with an acceptable hike but the ordeal is not over. “I am coming to terms with corporate culture. A startup is pure anarchy.”

“Startups are underdogs by nature. Working for them is both fun and a learning experience. Yes, it is risky, but there is an upside to compensate for it. Once one forgets this dynamic around a startup, and treats them like ‘topdogs’ where cushy comfortable jobs exist, things go wrong,” says Sharad Sharma, former Yahoo India CEO and co-founder of iSPIRT, an Indian software product think-tank. He is critical not just of hiring strategies at startups, but also of the perception of these as a one-stop solution for the economy. “In India, new-age startups are wrongly considered to be employment machines. That’s not how it works,” he says. “They create a new paradigm of working which, over time, leads to the renewal of an industry or a society. For instance, manufacturing is returning to the US because of innovations in 3D printing brought to life by startups in the Valley and Boston areas, which don’t employ many and are very lean. But they have been responsible for a surge of manufacturing jobs across the US. These new jobs are an important side-effect of their work. In India, we oversimplify this pattern and expect new-age startups to be direct job creators.”

Despite all the pitfalls, for Amit Anand, 41, a non-startup is a non-starter. “When I joined this world in 2013, if you came from orthodox companies, startups were a means to getting the desired CTC,” he says. After 11 years in the BPO industry, Anand was getting on in years and needed to reboot his career. Sure enough, after joining TaxiForSure, he quickly went from managing a small operation to running the Karnataka business. “It came at a cost. I barely saw my son grow up,” he says. Later, Anand was headhunted by Housejoy and Urbanclap, both service marketplaces. He is a consultant now. “I have another four-five years of startup building left in me,” he says. “Once you are in, it is addictive. The risk is part of the fun.”

Serial startup employees like Anand are like high-wire artists courting professional peril day after day. Whether they are in it for the thrill, or because transitioning to a corporate job is not a smooth affair, there are a lot of them in the market today. Layoffs have become good sources of affordable hires for firms like Practo and Bigbasket that are still scaling up. Companies led by experienced founders and operating on principles of frugality and sustainability are the ones that remain attractive. Ironically, they do not pay astronomical salaries and are selective about hiring: only real startup enthusiasts need apply. When Rana Vishal Singh, 29, an entrepreneur and former TaxiForSure employee, shut down his own startup, a bike taxi service, earlier this year, he was apprehensive of associating with another startup. Tarun Davda, managing director of Matrix Partners India who is on the board of several startups, convinced him to join Treebo Hotels, a budget brand that has a 200-member team and 100 properties. “The marketing spend is not much and the company is frugal. Every employee is required to spend 30 nights a year at Treebo hotels. Culture is everything here,” says Singh who now leads its marketing efforts.

The right fit is an elusive thing, says 32-year-old Prasan Arora, who handled special projects at Housing for a year before quitting early this year. Two months of interviewing, making elevator pitches and hustling his way through contacts taught him that “recruitment in India is like an arranged marriage, where the employer is the groom dictating terms and the employee is the bride.” Interviews with leading e-commerce startups did not work out, either because there was “no chemistry” between them, or because they asked him to take a pay cut. “Recruiters for startups in India have a sense of entitlement,” he says. “I was looking for a meatier role, and I had bills to pay and family pressure. I needed to act fast.” When Chennai-based SaaS company Freshdesk reached out in March, Arora joined because here was a six-year-old globally-facing technology firm that was growing consistently—it has raised a total of $94 million from Accel Partners, Tiger Global and Google Capital— and yet retained its startup culture. “The stability is welcome,” says Arora, who has over eight years of experience. Freshdesk co-founder Girish Mathrubootham says the company has now put hiring on hold since the market is flooded with talent. “We are getting very selective. There is no hurry to hire,” he says. “Let us up the bar.”

Bangaloree-commerceFlipkartLayoffsTaxiForSureventure capital