By now, most readers will be aware that a stellar group of entrepreneurs has sent a letter to the home minister regarding the arrest of Stayzilla co-founder Yogendra Vasupal. This is definitely a first for the startup community and signals the maturity of the ecosystem.
Some readers may ask why this is such a big deal. Aren’t customer-vendor payment issues endemic to the whole industry? Others may even point out that the other party involved in this case is also a startup. Why should a letter be sent to the central ministry?
The answer, in my mind, is quite simple. This is not ‘just’ about another company going bust or laying off employees or even payment disputes. This is significant as entrepreneurs seem to identify themselves with Vasupal. This empathy is not only because Yogi seems to have endeared himself to the entrepreneurial community with his self-effacing blog, making a candid admission that he lost his way.
Entrepreneurs see their own ups-and-downs mirrored in the decade-long journey of the Stayzilla team. These struggles include everyday goals, be it operational (hiring and execution), financial (fund raising, working capital woes) or even the pains of laying off individuals who they’ve worked with at close quarters.
In a private conversation with a few known individuals, there were a couple of arguments put forth. I would like to address them here while maintaining the confidentiality of the individuals involved.
1. Arm-twisting is a reality, and startups should face up to it. There seems to be surprising acceptance of the heavy-handed manner in which Yogi was arrested and the way his custody struggle is playing out. I’ve been told that this is how the ‘real’ India works and there cannot be a separate rule for startups. My contention is simple: Just because one individual does not have a voice, while another seems to have the necessary clout, should the ‘intent’ be ignored? Was any thought really given to the due processes to establish ‘criminal intent’? Startup entrepreneurs have their share of day-to-day issues to tackle. They have neither the experience nor the legal wherewithal to deal with these issues. They need support infrastructure and the way the founder community has rallied around this is actually admirable.
2. That founders are lining their own pockets while laying off employees and defaulting on payments may be true in some cases, but it is completely unacceptable to paint the whole community with the same brush. As a matter of fact, Stayzilla’s shutdown was conducted in a structured manner. The proper process was being followed–statutory payments were made first, followed by employee dues. The team helped employees find jobs. What seems to be lost on most is thatnobody will align en masse with a founder who has built a company on broken promises. I’m sure one would notice that there are numerous cases of startups making false promises and then shutting down, but these individuals have not seen the outrage or positive support that Yogi has received.
3. Another contention in the Stayzilla case was that this craziness was driven by VCs with no thought to long-term implications. But aren’t these investors putting in real money into the companies? Do they also not stand to lose? The reality is that VC is a risk-reward business. These VCs are investing in the models with their eyes open (hopefully). Even if there is a loss for them, who has gained? Surely, it is the consumer/general public. Show me an individual consumer who has not enjoyed and doesn’t realise that the incentive model of Uber or Ola is not sustainable. The investment is made with the expectation that there will be lasting behavioural change and short-term losses are acceptable. That is the outlook of the investor and we should not second-guess this.
In my mind, this is the real coming of age of the startup community. For the first time, we as a community are breaking away from ‘socialist’ links and closing in on the real denominators of capitalism and democracy.
Isn’t that a sign of maturity? If you want to welcome the startup revolution and strengthen the entrepreneurial spirit, all you have to do is to support this democratisation process.
Ravindra Krishnappa is an angel investor and product/startup incubation specialist. He led the Indian Angel Network’s investment in Stayzilla and was also a board member of the startup. He resigned from Stayzilla’s board two years ago when the firm raised its Series B round.
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