New Delhi, January 07, 2019: When Bentonville-based retail giant Walmart announced it was acquiring a 77% stake in Indian e-commerce pioneer Flipkart for $16 billion in May 2018, it seemed like that’s all the startup world would talk about for the rest of the year. Until November, when Walmart issued a statement saying Flipkart co-founder Binny Bansal was leaving the company for failing to disclose ‘personal misconduct’. And it came just months after Sachin Bansal, the other cofounder of India’s most successful internet startup, sold the last sliver of stake that he’d held in the company they’d set up as 20-somethings in a two-room house in 2007.

Since then, founders — from early to growth-stage — have woken up to the need to protect their turf from investors who could go on to control the company. Founders of successful startups have begun lobbying for shares with differential voting rights, while smaller entrepreneurs are educating themselves about how to protect themselves while raising capital according to the reports published in retail.economictimes.indiatimes.com.

“Our founders had a conversation about navigating future fundraises while retaining adequate control over decision-making. Not just Binny but also Sachin’s exit has sparked that debate,” said Harshil Mathur, co-founder and CEO of merchant payments platform Razorpay.

Another entrepreneur, who did not wish to be named, said that when a startup continuously raises capital for growth, company vision and culture could change. “New investors who pump in hundreds of millions of dollars might have a different plan or vision for the company. The conversations have become regular with the growing influence of foreign capital,” said the founder of an early-stage startup in Bengaluru.

Ola co-founder Bhavish Aggarwal sensed that such a situation could arise, and in 2017, when it seemed like SoftBank was muscling in on strategy, had certain clauses in Ola’s articles of association altered to give him tighter control.

But what does a founder do when she or he has to raise capital to make sure the business is scaling up? Avnish Bajaj, founder and MD of Matrix Partners India, feels founders should acknowledge the need to balance control and requirement for new capital. “If you want to raise tonnes of capital, then you will dilute. Within reason, I think founders should keep control of their company. However, you are raising tonnes of capital and you have a responsibility to that capital. Founders need to recognise this balance,” he says.

Most VCs, explains Bajaj, would love for founders to keep control of their companies all through and take them public. “That’s where VCs make most of the money. However, everything doesn’t go as per plan all the time. So founders should keep in mind that if they raise large rounds of capital and things don’t go according to plan, it could be a tricky situation to navigate, which is why I love founders who raise as much capital as they actually need instead of as much as they can get,” he said.

CarDekho co-founder Amit Jain breaks the problem down: “First, focus on what’s right for the organisation and then on what’s right for you. The organisation is bigger than the individual.” Earlier in the week, CarDekho raised $110 million in Series-C from Sequoia and others. It would be interesting to see how Jain goes about meeting capital needs from here on.

Retail.economictimes.indiatimes.com further added that these conversations also highlight the difference in the way Indian founders and their counterparts in Silicon Valley think. In 2015-16, Flipkart hired senior executives from the Valley, most of whom left within a year or two. That sparked the debate on Indian founders being unable to let go of crucial decisions that control a firm’s fate. Some of these executives who came from US have said this in public.

Domestic startup think tank and lobby group IndiaTech is pushing for a dual class of shares with differential voting rights, or rights for founders with a relatively small stake to retain stronger voting rights. Deep Kalra, chairman of MakeMyTrip, has been talking about the need for companies led by Indians and has asked for government sops. “In the US, in companies like Facebook, founders have relatively smaller stakes after years of dilution but get stronger voting rights in the strategic decision-making process,” Rameesh Kailsam, CEO of IndiaTech, told TOI recently.

The past year has also had startups taking another look at company culture. “We have seen a spike in requests for workshops on workplace behaviour,” said Supratim Chakraborty, associate partner at Khaitan & Co.

Much like major global startup hubs, India’s startup ecosystem is male-dominated. As a consequence, many male founders are apprehensive, but women founders say change has been a long time coming. “The current chain of events will lead to better awareness among all stakeholders,” a female entrepreneur said.

For now, these conversations have started. Perhaps real change will begin in 2019.

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