The Snapdeal debacle brings to light the self interests of VC firms which have come into play to ensure that the company finds the right path to continue operations. More often than not, VC firms back off from investing in a company if they see a small loss or a downfall in the revenues. For large VC firms, it is all about power play and the infusion of huge amount of money. When the company is standing at the edge, on the tipping point, the VCs back off and refuse to input any more money to save the company. This is when the founders have lost interest and their investment in the startup. This is also the period where there are no buyers in sight and the sellers have shifted loyalties, the investment firms back off and there is stiff competition from similar startups. When all of the listed factors occur at the same time, the startup dies and there is no one to blame.
Snapdeal raised funding in many rounds and ended up being one of the largest eCommerce companies, now when the company is making losses, there are no VCs willing to influx money and help the company float. The founders are impacted financially and so are the investors, but the employees are facing the biggest loss. In addition to the employees, the vendors who have invested in the company will also be impacted. Snapdeal is not the first company to have gone through this debacle, there are many Indian startups which have died due to the boardroom battle. This boardroom battle has a clear impact on the employee morale and also influences the campus hiring process. In 2017, joining a startup is not seen as a good career option, in contrast to the previous two years.
Housing.com had been merged with PropTiger and Stayzilla due to lack of funds. Shopclues is currently going through the same battle with an ex promoter. This is a clear sign that the decisions of an investor have a huge impact on the company. Many times, the founders and the VCs do not agree on the operations of the business and this impacts the next round of funding. The founders have to plan their activities, keeping in mind, the opinion of the investors and in the hope of an influx of money for the coming quarter. It is easy to give money, but investors need to learn to build a solid relationship with the founders so as to build a long lasting business. Only when at investor begins to act like a friend and a guide to the founder, he will begin to treat the business like his own. An investor should place trust and investment in a company when he is ready to face the consequences of the same. The investor should also know when to step in and when to stay away.
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