Kanwal Rekhi Calls Flipkart a Foolish Startup, Says Govt Must Not Bail Out Companies
"If you start to bail out the failed entrepreneurs, you are going to give new entrepreneurs the sense that they will be bailed out too."
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Kanwal Rekhi, the Indian-American venture capitalist currently serving as the managing director at Inventus Capital Partners thinks it is unfair for Flipkart to seek government help in bailing the company out.
He says people like Flipkart founders just didn't have it.
"They were trying to do something which was sort of undoable and they were throwing money at it. And now they have wasted billions of dollars and have failed in the marketplace and are now looking for protection. That's not the right way to think."
Rekhi believes companies should be allowed to fail.
Letting companies fail is as much a part of the entrepreneurial process as much as is seeing companies succeed says Rekhi.
"People learn from other people's failures. If you start to bail out the failed entrepreneurs, you are going to give new entrepreneurs the sense that I will be bailed out too."
In a chat with Entrepreneur, Rekhi said the likes of Flipkart and Ola who want the Indian government to set a fair pricing to protect them from international competitors in the domestic marketplace are trying to give away their freedoms and become China.
"It's nonsense. I am a little mad that these guys (Flipkart, Ola) want to be like China. Do we want to give up our freedoms in India to be like China, that's what it takes. They want the government to set the pricing! Pricing is at the heart of entrepreneurs, if the government to set the pricing for you, how will you work?," questions Rekhi.
Rekhi believes if there is an underlying safety net of the government then entrepreneurs will take foolish risks because they know they will be saved.
How can companies think if they win, they win on their own and if they fail, they know someone will bail them out asks Rekhi.
Rekhi calls Flipkart a foolish startup.
"Flipkart consumed massive amounts of capital in 2015, they were paying crores in salaries was hiring people, they were selling products below their costs, their business model had no positive margins, they have no business morals."
Rekhi says Flipkart sale of own shares in secondary market leading to diversification meant they didn't believe in their own company.
"They didn't believe in themselves. They knew their company best and they were selling those shares. They are not the entrepreneurs everyone should look up to," says Rekhi.