Right now there are many distraught entrepreneurs and industry watchers who are either a) saying “I told you so” or b) saying “this is bad for startups”, when they read the latest “forced merger” between several eCommerce companies. While many felt it started with Flipkart and Letsbuy, the most recent BabyOye and Hoopos has more commentary on the negative side.
While we in India, have been witness to these mergers only in the last few years, this has been happening in the valley for eons The new age name given to some of these funded startup exits is acqui-hire. Somehow acqui-hire in the valley is great and forced mergers in India is not.
There are and were many naysayers when there was a raft of funding in the eCommerce space a few years ago. Many folks were right about unsustainable business models, rampant discounting, unsustainable customer acquisition costs, etc. To them I say:
From Alfred Lord Tennyson’s poem In Memoriam : 27, 1850
“‘Tis better to have loved and lost
Than never to have loved at all.”
The eCommerce bubble in India has created a new set of entrepreneurs. They did it with other people’s money. No one really lost except for the LP’s who I am sure are now once bitten, twice shy about returns from Indian startups.
Honestly though, I have talked to 5 Limited partners at large organizations who are disappointed with returns from Indian Venture capital, but also realize they dont really have much of a choice but to stay invested.
There are some that claim that other deserving entrepreneurs, who were working on non eCommerce startups, were ignored during the eCommerce bubble. That’s absolutely nonsense.
In India over the last 3-5 years, if you were a good entrepreneur with a good business, great team and chasing a large market, you were able to raise money. The ones that did not get funding, either were chasing smaller markets, were going to grow slowly or were not sufficiently good teams.
Now what do I claim that mergers are good for Indian startups?
1. They help companies and their employees consolidate to create one large player in a mid-sized to big market, instead of 10 players chasing the same market and being extremely competitive.
2. They provide a means of employment for the many employees at those companies who were not the founders or the investors.
3. They give hope to the many entrepreneurs in the making that you can have a “failure” and still be considered for another opportunity in a startup.
4. It provides the investors an opportunity to consolidate their portfolio and hence double down on their winners, without spreading themselves too thin. That way the remaining portfolio companies win.
5. It frees up time from several investors having to spend time on middle-of-the-road companies, and gives them more time to spend chasing new opportunities.
6. It is easier to merge a company in India than it is to shutdown. The process to shutdown a company is also a lot more expensive.
Anything I missed on the other goodness from the eCommerce forced mergers?
