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Let’s buy firms responsibly
Sudipta Sengupta urges consideration for employees in mergers and acquisitions
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Illustration: Sanjoy Naorem |
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SURE IT won’t close down?’ — not exactly the question you would like to hear from your father when you tell him about your first job. But I had to because after all the education I was joining a nondescript startup. Being born in a regular Indian family, I cannot blame my parents for nurturing a common dream of their son being having a successful career. Working for a startup may be a lot of other things, but never carries the social acceptance that would make me a ‘success’. It will be an understatement to say that I was concerned — I was troubled about my future, worried to infinity about whether venturing into an unsecured arena will be a right thing to do at the start of my career. But something inside urged me take the leap.
Years later, I have no regrets. Rather, I was fortunate to have worked with startups rather than the so-called ‘brand names’. I will any day choose a startup as a working environment for the sheer challenges, learning and job satisfaction they provide in everyday work life. The credit goes to the passionate entrepreneurs who started, owned and managed those startups. But not everybody is as lucky, at least that’s what I felt when I heard Letsbuy.com — a prominent name in Indian e-commerce that closed down last week.
Letsbuy became a prominent name in the Indian e-commerce industry in a short span of time. In 2011, it raised a funding of $6 million from venture capital (VC) funds. After spending an obscene amount of investor’s money in advertising and advertising alone, Letsbuy sold itself stake to a bigger player in the market — Flipkart. com. What business strategy allows you to burn your entire cash in one year and make yourself vulnerable to a distress sale is something they never teach you at business school. And similarly, why would Flipkart, the supposed king of Indian e-commerce, buy a cash-strapped identical setup and then show the employees the door before closing down the company? In the last one year, Letsbuy had focussed on building its brand and acquiring its customers, and yet after the acquisition Flipkart never thought of retaining them. Why is that? Clearly there are few things in business that common earthlings like me will never understand.
Technical evaluation will clearly indicate that all parties involved actually had their interests served. Letsbuy owners and investors for the time being moved from a drowning boat to a safe ship with their kitty filled with high valuation stock options. Flipkart managed to save the market sentiment by not letting Letsbuy die its natural death — that only enforces their leadership position and by some twisted logic takes their valuation up.
So if everybody is happy, why am I worried? I am worried for the number of Letsbuy employees who were martyrs of the deal. For, having worked with startups for quite some time now, one thing I realised was how difficult it is to nurture the human resource in a small business setup — especially at the junior and middle level. In most cases, the person who is choosing to work in a startup environment has apprehensions about the stability of the job. Society, with all its stereotypical rules of associating success with the brand name of your employer, doesn’t help either. This constantly creates a void of talented resources for the new startups. I am afraid the Letsbuy-Flipkart deal will create distrust in many towards the startup work culture.
IMAGINE THE employees of Letsbuy who till January were working for a fast-growing e-commerce startup and feeling good about it. Seeing your company’s advertisement on every webpage actually creates a sense of achievement among the employees too. In February, when the Flipkart deal happened, many employees felt they were now becoming a part of a bigger organisation. But by May, a Business World report quoted anonymous employees clearly predicting that Letsbuy is going to be closed down in the near future. Hundreds of employees have left the company and the others are scurrying for a new job. Mind you, it was only three months after the takeover at that time, and employees sensed that the company was closing down? It only proves that the decision had been taken long back, maybe even before the acquisition happened.
Flipkart may have saved the investor sentiment for today but discussions on social media platforms will prove that they have hurt a lot of employee sentiments. A particular anonymous profile worth mentioning is named ‘Letsbuy Employ’ on Facebook who narrates down the ordeal of a suffering employee. There are yet many more that have vouched never to look at startups as a job option.
Companies do get taken over by rivals and companies do get closed down by promoters — this is not the first time we have seen that happening. But this one clearly indicates the coming storm. Entire 2012, we have blown bubbles of e-commerce boom in India. The way most companies are burning cash and considering putting up a ‘for sale’ notice on their gate as a part of exit strategy, we will see more consolidation happening in coming days. Now if the employees keep getting hurt in this process, then many will stop considering internet industry as career option. Even more startups will suffer from attracting the right talent. And for an industry that has just started taking off, this will be a death pill. My heart hopes not to see this happen. But will our new age entrepreneurs, who are continuously making a habit of living life king-size on investors’ money, ever understand?
Sudipta Sengupta is general manager of a citizen journalism news portal merinews.com.
sengupta.sudipta@gmail.com
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