What is Missing in Indian Startup Ecosystem? Millions of young Indians are throwing away the securities of a job and starting up and an entire ecosystem is very supportive

By K. Vaitheeswaran

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In 2013, I was struggling through the most diffi cult phase of my life. Indiaplaza (India's fi rst e-commerce company) which I had co-founded in 1999 was going down badly. I had lost the best years of my life, my reputation had taken a beating, my family and I were being hounded and abused by creditors and I was desperately in need of money. At that time, the CEO of a well known e-commerce firm offered me Rs one crore in cash for a DVD consisting of our customer database and transaction histories.

I was willing to consider a payment by check to the company but he wanted to pay me cash. When I refused saying that I cannot sell company assets for cash in an underhand deal, he was surprised at my stupidity.

"What's the matter? Surely no one will know." I told him -"But I know. That's all that matters." Really, that's all that should matter, but the reality in the Indian start-up ecosystem is di erent.

Over the past few years, there have been quite a few cases of entrepreneurs found wanting in integrity while executing business deals and transactions.

Founders of well-funded startups have allegedly raised funds from marquee investors at high valuations for subsidiaries and subsequently sold those to friends and relatives at lower valuations (without the knowledge of the existing investors) which later got acquired by other hyper-funded startups at high valuations. Now that the sordid details are breaking out in the open, all the involved parties are busy suing each other.

Where to Draw The Line:

A few years back, a co-founder of a start-up was allegedly involved in illegal nancial transactions and was arrested. A few years later, this entrepreneur has successfully managed to raise several rounds of funding from reputed funds for another start-up which con rms that some investors care two hoots about integrity as long as there's some possibility of attractive returns.

There are many whispers about founders showing great creativity with their nancials to create an image of superior business health when the reality is much worse. There is no better way to say this — this is unadulterated lying. India is in the throes of a huge revolution. Millions of young Indians are throwing away the securities of a job and starting up and an entire ecosystem is very supportive. Something's missing though.

The Need of The Hour:

What India needs right now are entrepreneurs who are truly inspirational; founders who not just launch, build and scale sustainable businesses but also do it by sticking to the straight and narrow. What India does not need are examples suggesting that nice guys will nish last and the best way to get ahead is by tripping and fouling the law.
An honest entrepreneur with high standards of personal integrity will create an aura around him or her which will inspire colleagues to work harder, generate respect among suppliers and delight customers.
Most importantly, personal integrity will set the standards for a superior corporate culture that will create a high performance environment. Sometime back, an investor was explaining to me the due diligence processes that investors follow and the challenges in extracting information hidden deep inside a start-up.

I was perplexed at this system which has a big aw in my view. So much e ort is spent in trying to gure out the veracity of nancials, the uniqueness of products and services, the satisfaction levels of customers, the commitment of senior employees, the legality of contracts etc.

But there's absolutely nothing that tries to nd out the answer to what I think is the most important question in a due diligence — is the founder an honest person? If the answer to this is no, nothing else will matter. Conversely, if the answer is yes, then nothing else should matter.

Everything else is just detail. A successful entrepreneur invests seven things into his start-up - blood, sweat, tears, mind, body, heart and soul. These manifest themselves respectively in forms like adaptability and keeping an open mind on things; perseverance and hard work; humility; intelligence and sharpness of thought; a bias for speed and action and undiluted passion for the venture. But the most important part is the soul which stands for integrity and if the soul is lost then everything else is irrelevant.

As I wrap up this article, I glance at an online news item. The founder of a start-up, which has been acquired by a large corporate group, has just been arrested for allegedly attempting to fraud her husband and some friends. Something's seriously missing.

(This article was first published in the December issue of Entrepreneur Magazine. To subscribe, click here)

K. Vaitheeswaran

Author, “Failing to Succeed - the story of India’s first e-commerce company”

K. Vaitheeswaran is the author of the recently released book “Failing to Succeed - the story of India’s first e-commerce company” and is widely hailed as the 'father of e-commerce in India'. He co-founded India's first e-commerce company Fabmart.com (later rebranded Indiaplaza.com) in 1999.

In 2001, he co-founded the Fabmall supermarket chain, which was subsequently acquired by the Aditya Birla Group and rebranded 'More'.

Vaitheeswaran has advised global brands, including Deloitte, Diageo and Tata, among others, in their digital initiatives; mentors several start-ups; and is well known in the Indian start-up scene. He is a popular speaker on entrepreneurship at industry forums and institutes, including IITs and IIMs.

He lives in Bengaluru with his wife and son.

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