Byju's & Paytm woes: Rockstar founders need to accept the limits of their power

Paytm Payments Bank was repeatedly warned by the RBI for “persistent non-compliance”. Why the barely six-year-old bank refused to pay heed to a regulator a single call from whom is normally enough to send chairpersons of the country’s biggest banks scrambling is a mystery. (Illustration by Suneesh K.)

Two of India’s hottest startups Think & Learn Private Limited which runs the edtech Byju’s and One 97 Communications Ltd which owns fintech Paytm, are facing the heat from investors and regulators. Their founders, Byju Raveendran and Vijay Shekhar Sharma, are part of a legion of founders whose overweening ambitions may have ended up hurting the very firms they founded. While Byju's $22 billion valuation just two years ago now stands almost completely eviscerated, the regulatory troubles of Paytm subsidiary Paytm Payments Bank has already seen the company’s share price drop nearly 40 percent since the Reserve Bank of India placed strictures on its operations.

It seems to be the fate of many high-flying entrepreneurs who lost their bearings in the flush of overnight success. In the US, Theranos founder Elizabeth Holmes, once the youngest and wealthiest self-made billionaire in the country, is now serving a 11-year prison sentence for defrauding investors through her fraudulent blood-testing business. Another former billionaire founder Adam Neumann’s WeWork filed for bankruptcy late last year as did the incarcerated Sam Bankman-Fried’s crypto exchange FTX. In China, Hui Ka Yan was, not too long back, the toast of the business world for building a real estate behemoth, which transformed sleepy villages into urban enclaves for middle class Chinese to buy homes in. It turned Hui into one of the country's richest and most powerful men. Now with the collapse of his company Evergrande, Hui faces charges of corruption while the metropolises he built stand as empty shells, a symbol of China's economic downturn.

Raveendran, Sharma, Holmes and Hui are all creators, men and women who had the ambition and the drive to birth their dreams. Setting up a company and growing it to multi-billion dollar valuation isn’t an easy task. Estimates show that 99 percent of startups don’t last their second year. It takes extraordinary skills to not just survive but build a market leader like Byju’s or WeWork.

So what happened to derail their efforts and bring such soaring enterprises to their knees? Perhaps these companies became the victim of their founders’ success and the adulation they received. After all, till very recently Raveendran could do no wrong, not just for his financial backers, the PE funds, but also the public at large. Holmes had the likes of former US Secretary of State George Shultz and Henry Kissinger on the board of her company. But so charmed were these worthy men by the aura of the young lady who saw herself as a female Steve Jobs that they forgot to ask the most obvious questions.

That is the problem with founders who become bigger than their companies. They start living in a bubble cutting themselves off from reality. The same self-belief that propels their initial success also engenders the conviction that they can do know wrong. In the process, they ignore or shut down any dissent and build an echo chamber around themselves.

It isn’t just entrepreneurial ventures that have suffered the disastrous consequences of such delusion. The world of music is full of bands that broke up after one member hogged all the limelight. Bands like the Beatles, Pink Floyd, Pearl Jam and Eagles broke up after one member started believing he was bigger than the group. In a piece titled 'The Biggest, Messiest Band Breakups in Music History', Rolling Stone magazine quoted U2 frontman Bono as saying: “You’re as good as the arguments you get, but at a certain point, when people are doing well, the male loves to be the lord of his own domain.”

It is the same with business when founders and leaders start attributing all the initial success to their own genius, ignoring the role of luck or timing or the others. It becomes all about them, leading to what is called the God Complex. Not entertaining thoughts of failure is a great asset when you are trying to build something. But not recognizing the limits of your own ability or even worse, not accepting the limitations placed by rules and regulations is a dangerous thing. Paytm Payments Bank was repeatedly warned by the RBI for “persistent non-compliance”. Why the barely six-year-old bank refused to pay heed to a regulator a single call from whom is normally enough to send chairpersons of the country’s biggest banks scrambling is a mystery.