In December last year, Sachin Bansal, co-founder of India’s largest e-commerce company Flipkart and Bhavish Aggarwal, co-founder of ride hailing service Ola hit out at foreign-origin firms on their capital dumping practices and asked the government for a ‘level- playing field’ for India’s startups.
Now, prominent venture capitalist Vani Kola, founder and managing director of Kalaari Capital has also joined the controversial debate. In a post on online publishing platform Medium.com, she has extended support to Indian entrepreneurs in their fight against foreign-origin rivals.
“The first experience of well-executed ecommerce experience for most Indians came from Snapdeal or Flipkart, and the convenience of hailing a cab from anywhere using an app came from Ola. Amazon and Uber weren’t around when these entrepreneurs were busy converting skeptics into customers,” she stated in the post published on Saturday.
It should be noted that Kalaari Capital is an investor in both Snapdeal and Flipkart-owned Myntra.
She highlights the consequences of a lack of regulation against capital dumping practices in the e-commerce industry. She cites the example of China and Europe, whose market value in the Internet sector is $1 trillion and $50 billion, respectively. This is because while China banned companies like Google, Twitter and Facebook, Europe did not, she explains.
“India has policies to protect milk, steel, and other commodities from anti-dumping. If you want to import a foreign car, you pay a hefty duty. Even service sectors like Banks and Insurance have specific norms to ensure long term viability of these industries,” she added.
Besides market share, capital dumping would affect foreign investment in local firms, she states.
Foreign investment in Chinese Internet companies soared between 2004 and 2014 to $200 billion once multinationals were prevented from setting up shop in the country, Kola writes. On the other hand, local firms in Europe did not attract much foreign investment because of the presence of MNCs, which require little additional capital.
Capital dumping would also result in fewer jobs being created, if Indian Internet firms failed, she writes.
“Chinese internet firms have created over 2 million jobs. In India OLX has 300 employees to Quikr’s 2,700; Uber has 1,500 employees to Ola’s 7,000; Whatsapp has 20 employees to Hike’s 500; Amazon has 24,000 employees to Flipkart and Snapdeal’s 45,000,” she stated.
However, Bansal’s and Aggarwal’s call for protectionism had raised criticism last year.
Mahesh Murthy, co-founder early stage investing firm Seedfund, said that Flipkart’s and Ola’s capital dumping argument is bizarre because both firms have dumped more foreign capital in India than their counterparts.
“From a consumer’s point of view, they have received the benefits of world class products and a competitive market because Amazon and Uber exist in India. It is not the government’s fault that these founders deliberately chose the ‘copycat’ path to riches. The government should not bail them out,” he told TechCircle.