Union Commerce Minister Piyush Goyal had said that Indian startups lacked innovation and weren’t working in deep-tech sectors, but other commentators are going a step further.
Columnist Suhel Seth, who is also the chairman of Marketing Committees of Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce & Industry (FICCI), has said that 80 percent of Indian startups are a “racket.” Seth’s comments, made on Republic TV, have drawn a sharp response from the startup community.
“80% of the startups in India are nothing but a racket,” he said. “The first thing that the startup founders do is buy themselves Lamborghinis and homes in Amrita Shergill Marg,” he alleged.
“I’m in total agreement with Piyush Goyal. If India has to make a meaningful contribution, it has to be innovative. Where are our innovations? We keep talking about our software prowess and what great minds we have. Have we produced a Facebook? No. Have we produced a Google? No. Have we produced anything which is innovative, which is the global brand? The answer is no,” he added.
“This is all a game of valuation. Which person in the world starts a business with a view to getting out of it? That’s what most of our startup founders do,” Seth said.
Seth also questioned the high salaries and stock secondaries of founders of loss-making startups. “When was the last time you paid yourself Rs. 100 crore when your company was losing Rs. 3000 crore? These guys are doing it. No one is to check,” he said.
“Now let me tell you of the racket, because I know the racket. The PE guys, the VC guys and the startup guys are all equally intelligent or crafty or dumb. Because each guy’s supporting the other. And please, I want to make one caveat here. I’m not referring to every startup. I’m only talking about the malaise. There are brilliant startups, let’s be honest. But the general malaise we’ve seen is that people are taking free money,” he said.
Seth also levelled the more serious allegations of financial impropriety at VC and PE firms. “Most VCs and peas are nothing but rackets. It is also money washing. Let me tell you, you’ll be shocked. Everyone knows in this universe, but we can’t take names. How people who are putting money in, let’s say on behalf of a particular bank or a VC, they do a side deal with the promoter, with the founder, and they get certain shares which are benami,” he added.
Seth’s diatribe saw reactions from the startup community. “Aren’t we harassed enough that we need this crab mentality egging the bureaucracy on by calling founders and VCs frauds? Ye deshdroh bandh karo,” said Shaadi.com founder and Shark Tank judge Anupam Mittal.
“Completely untrue, unfounded and non-specific allegations against start-ups, founders and VC and PE investors in general,” said Info Edge’s Sanjeev Bikhchandani. “Suhel has also called out Masa and SoftBank specifically. Perplexity informs me that Masa and SoftBank have invested over USD 15 billion in India. They are great believers in our country. We should be grateful – India is a capital short country. This is particularly useful when Chinese capital is not permitted. Start-up founders take a risk with their careers and their future to do what they do. And they struggle and they tighten their belts and they don’t give up. They are heroes and they should be respected and lionised not abused,” he added.
Some of the points Suhel Seth raised are common at startups across the world — Amazon too made losses for years, and eventually became one of the most valuable companies in the world. Also, it’s not unusual for startup founders to sell some shares after several years of running successful companies. But some other allegations might be worth looking into — there’s plenty of startup money that comes to India through places like Mauritius, and prominent Indian startups have been incorporated in places like the Cayman Islands. And perhaps most crucially, Suhel Seth’s viewpoint is that of an outsider looking into the startup ecosystem — over the last few years, startups have finally gone mainstream in India after years of being on the fringes. And it’s vital they maintain their clean image amongst the general public if the startup sector is going to succeed in the years to come.