Do startups need to go from uber cool to old school?

Early last month an open letter on Quora by a pink slip-ed employee of Local Oye , a local services provider startup, to its founders and investors sparked off a volley of replies, tweets and justifications. The letter by the employee revealed the frivolous lives led by top layer executives. Juicy details included how there were drinking sessions in the middle of the day in office, and CEOs and senior staff stayed away from office for months together. The founder eventually did admit to making some mistakes in finances, product and hiring, but also made a strong statement at the end that they will not stop partying. Working in a startup has always conjured up an image of everyone from the CEO to the intern sitting in the same room, seated on bean bags, sipping on coffee from a high-end cafe, walls adorned with colourful posters – you get the drift. But reality is catching up real soon for these dreamy startups. Till last year, when the wave was just cresting, it looked very rosy, very upbeat as investors were pouring in money as long as their firms were outdoing competition. But that too began to change with the sheer number of startups springing up, competing for every bite of the pie. Also, investors who didn’t get expected returns on a company suddenly became averse to investing in others. Going back to the dreamy image of working in a cool, hep and happening startup, we dig in a little deeper and talk to those who have been there and done that and come out with not-so-great experiences. Some of the responses we got exposed the huge gap that these startup founders need to address when on one hand, they do get sufficient, if not bloated up, funding but tend to over-spend in areas that could have been avoided in the long run. We talked to someone working for an app-based job search platform. He shares how the company would celebrate Saturdays and the day would be all fun and games and team building activities. He joined in August last year and by December that stopped. And soon after that, his entire team was asked to leave citing ‘business needs’. “The co-founders were good to work with, the place was nice. It came as a shocker, but we realised this is happening in all startups,” he adds. Another ex-employee of Housing.com - the startup already infamous for its leadership snafus, shares the same sentiment. He was laid off under the label of ‘cost cutting and re-structuing of business’. “Startups in India are having a hard time raising new capital, there is a funding crunch, this was inevitable considering the bloated rounds startups had been raising so far with unjustifiable valuations. Startups are now watching their cash burn carefully, this means scaling back on some of the exorbitant perks that were being offered, fewer and smaller parties, etc. Many startups have seen layoffs as a result of the lack of funds in the market, this impacts the culture, as not only are people let go during this times but others voluntarily chose to move on, morale is definitely compromised, however employees who are in the startup game could choose to embrace these difficult times and work on reinventing themselves and their startups,” he says. Another serial startup employee, who has worked across several such companies in Mumbai, says that now there is a marked focus on generating revenues. Hiring is controlled, candidates go through more intense interviews than before. “A year ago, thought was let’s get people onboard and then think where to fit them. This process is completely vanished now. We never had party culture, but whatever we had for employee welfare is scrapped now,” he reveals. But all said and done, most of them would love to go back to a startup. “The amount of freedom that startup allows for individual, would be never matched in corporates. The casual dressing and flexible timings would be difficult to give up after so many years,” adds serial startup employee. Startups, however, need to pull up their socks and get their game straight. Maneka Tanwani, managing editor at OpenFin, a China-based startup tells us, “The slowdown is definitely here. Companies (with pressure from investors) have now realised that the honeymoon period is over and they need to show results. In terms of changes, I have seen startups across APAC are going lean. It has moved beyond slashing offsites and parties - it’s coming to big time retrenchment.” Maneka, who had been incidentally covering the APAC tech startup space as managing editor of an online news portal adds that as investors are obviously looking for returns, startups can’t help but axe non performing business streams. Taking this point further, Gautam Sinha, co-founder of global recruitment firm startup CBREX, and someone who has worked in corporates and has been an angel investor says that it all boils down to companies spending OPM – other people’s money, like their own. Any company that thrives on this culture of ‘waste’ will never lead to the creation of a long lasting business, explains Sinha. Highlighting on a very important factor of running a successful business – be it any size, any economy, any geography, he says, “I feel some of this (startups going bust) has to do with maturity of the founding team and with the current focus on RoIs, founding teams will be forced to “grow” up faster.” Citing his own example he shares that all six of them in the founding team of CBREX have spent between a decade and two decades either starting companies or working in companies. “This helps when you are building a culture as from the start the approach is balanced, a key virtue when you are building something ground up,” says Sinha signing off.   Editor’s note: Some names have been withheld on request