Controversies that marred Indian startup ecosystem in 2016

Moneycontrol Bureau

India's startup ecosystem was replete with controversies all year around.  From startup shutdowns, CEOs taking digs at each other, CXOs quitting en-masse, deal deadlocks and layoffs, the startup ecosystem had enough to offer.

The last two months of 2016, have been a dampener for the Indian startup ecosystem in hyper-local, food tech, software and investment domains. While grocery e-tailing and payment wallets have gained this year due to demonetisation drive by Modi government, other segments of the startup world have floundered.

Here are a few controversies which played out during the course of the year:

1) Rise of startup nationalism

At a Bangalore event Sachin Bansal, co-founder of Flipkart and Ola CEO Bhavish Aggarwal argued for protection for Indian companies which are unable to compete in sectors where heavy capital dumping is happening by MNCs. The move attracted a lot of criticism for both Sachin and Bhavish.

It led to a huge debate on rise of nationalism among tech startup ecosystem. Later, Uber’s CEO Travis Kalnick on his visit to India said that he will apply for Indian citizenship, if it gets over the top.

Also read: Why Flipkart and Ola's rants against MNCs are unjustified

2) Devaluation of Flipkart

The poster boy of Indian e-commerce space keeps on hitting the news ticket and this time it was due to reaching its lowest ever markdown when it was devalued by two of its major investors. Morgan Stanley marked down Flipkart’s valuation to USD 5.6 billion from a whooping USD 15.2 billion and Vanguard Fund devalued its share in Flipkart by 33 percent.Also read: What Flipkart’s devaluation mean for e-commerce industry?

3) Demonetisation: When nation’s pain became gain for E-wallets

November 8, 2016 – turned out to be a landmark date in country’s history as PM Modi announced demonetisation of Rs 500 and Rs 1,000 leaving a the citizens cash-strapped. The move came as boon for e-wallets as they witnessed multi-folds jump in their usage, downloads and transactions. Companies such as Paytm, Mobikwikm, Freecharge and JioWallet gained the most.

E-wallets also received a good response from small merchants as it was a cheaper option to conduct cash-less transactions.

4) Unicorn founders divorce

Bangalore based Mu Sigma, is among one of the few India-based ‘unicorn’ startups that is into a non–ecommerce segment. When Dhiraj Rajaram founder of Mu Sigma and his wife Ambiga, who was the company’s CEO took divorce, the startup ecosystem was abuzz about couples starting companies together.

5) Nikesh Arora quits Softbank

Nikesh Arora world’s third highest paid executive with an annual salary USD 135 million left Softbank as the COO of the company. He was in charge of the Japanese investment firm’s major deals in India, including Snapdeal, Ola, Housing, OYO Rooms, and InMobi. He accused of conflict of interest as he holds positions in other firms. Internal audit found no discrepancies.

6) Taxi aggregator wars

Uber sued Ola for USD 7.5 million, alleging that the latter was using fake accounts to book trips on Uber and then cancelling them, interrupting their business. Ola replied that Uber’s petition “has been filed in an attempt to bypass the laws of the land by foreign companies who run their operations in this country for profit without due regard for the applicable laws.”

7) The year of shut downs and job losses

2016 might just have been the year which saw the most shutdowns since the beginning of India’s startup boom a few years ago.  One of the largest grocery e-tailers in India, PepperTap shut shop after raising USD 50 million. Another big player that shut shop this year was AskMeBazaar costing about 400 odd jobs.

The shutdown triggered panic amongst hyperlocal startups and many investors declined to put in follow on rounds. About 20 such startups closed in 2016.

8) Oyo-Zo deal deadlock

Oyo rooms backed by Masayoshi son’s Softbank acquired its rival company Zo rooms by Zostel Hospitality Pvt Ltd. The aim was to take out the competition. The Oyo-Zo deal however, was stuck in a deadlock over valuation issues and Zo subsequently ran out of cash and shutdown.

9) Startup CEO’s V/s twitter trolls

2016 was also the year of Twitter Trolls in India’s startup ecosystem. Handles such as @uni_con1 and @Corporatekumar_ tweeted insider gossip in companies, people movements. Jabong CEO even filed an FIR against Unicon Baba for defamation. Snapdeal CEO Kunal Bahl also came under fire from such handles. He said he has developed a ‘thick skin’ to trolls.

10) IIT placements fiasco

Flipkart left more than 10 IIT grads in the lurch by deferring their placements. Through the course of the year, other firms like Grofers, Snapdeal followed suit. Thereafter, IIT's placement cell boycotted startups by deciding not to approach them for placement.

Also read: Why 2017 will be an interesting year for Indian startups