Home / Opinion / Columns /  The classic startup formula and spoilers in this script

Here’s a quiz question: what’s common to Amanda Seyfried, Jared Leto, Jesse Eisenberg and Joseph Gordon-Levitt? The answer: They have all been cast as flawed tech entrepreneurs in movies or TV shows, living an unsteady life hovering on the thin line separating bad from good, immoral from ethical, and hustle from fair bargaining. These actors portray Elizabeth Holmes (of Theranos), Adam Nuemann (WeWork), Mark Zuckerberg (Facebook) and Travis Kalanick (Uber), respectively, on screens big and small.

Most of them end up blowing up their company, getting sacked, constructing questionable business models, or, as with Holmes, facing criminal charges. The jostling, the snake-oil-salesmanship, the insane sums of money venture capitalists (VCs) and private equity (PE) funds pour into fragile projects, the rhetoric-on-loop about changing the world, the leaching of money from these companies, the hubris and lifestyles, all of which eventually lead to a meltdown, seem irresistible to script writers.

Good screenplays are almost always about human frailties and failings. The most successful personalities—whether politicians, sportspersons or even academics—are seen to have some chink or the other in their character that enables human folly. This is the lodestone that screenwriters apparently love mining. Silicon Valley and its obsessive culture have presented filmmakers with a beribboned package.

This is not restricted to Silicon Valley. India also has its fair share of brittle and febrile tech entrepreneurs. The latest example is the indecorous and public spat between Ashneer Grover, former managing director of fintech company BharatPe, and the company’s board of directors. The increasingly acrimonious squabble eventually led to Grover’s resignation from the company he founded, and the board subsequently sacking his wife, Madhuri Jain (a controller in BharatPe). A barrage of claims and counter-claims were exchanged between Grover and the BharatPe board. While there is no way of checking the veracity of these allegations and counter-allegations, it is Grover who seems to emerge stained from this fiasco.

It seems Grover’s problems started when he crossed swords with a key investor, VC fund Sequoia. Incidentally, it was a public argument with Sequoia that had led to the ouster of another startup founder, Rahul Yadav of Housing.com.

The dispute between Rahul Yadav and the company’s board also spilled out into the public domain. Angry letters were exchanged between the two parties, and duly leaked to the media. The ugly fist-fest ended with the board sacking the founder. The company was sold off and Yadav went off to pursue the life of a 9-to-5 employee in one of Mumbai’s leading real estate consulting firms.

At another level, the Rocket Internet-backed FoodPanda’s Indian business—one of the many food delivery services that had sprung up in India to cater to the country’s ever-hungry middle-class—had to be sold (and eventually shut down) because of severe problems of governance in the company, which included fake restaurant listings, botched up deliveries, unpaid dues to restaurants and unethical practices relating to human relations.

In fact, at a broader level, many failures in the startup universe can be attributed to lack of governance norms, both at the company level and the PE-VC fund level. This is the classical challenge for startups where the founder finds it difficult to graduate from a hands-on progenitor to a professional manager. Even at the investor level, many fund managers succumb to the god illusion.

Take this argument a step further. PE firms in India can perhaps be held partially responsible for some of the problems endemic to India’s startup culture: making easy money available on tap, no due diligence of the investee company’s management quality leading to rancour and recrimination, unqualified fund managers (former retail bankers end up managing complex structured portfolios), corruption including kickbacks, and lack of governance in PE funds bleeding into investee companies. There are also concerns about the provenance of PE funds, though nothing has ever been proven. Like all other industries, there are the good guys and the no-so-good guys; unfortunately, opacity in VC-PE functioning has fanned suspicions over their operations.

As an example of why such misgivings aggravate, look no further than the recent share sale by One97 Communications, popularly known as Paytm. The company’s initial public offering was priced at 2,150 per share, but the stock is now trading around 546, having lost nearly 75% of its market value since it listed four months ago. In the absence of profits over prolonged periods, many felt that the sale was over-priced; and yet, some premier PE funds acted as anchor investors at 2,150 a pop.

The height of miscalculation was actually Masayashi Son’s Softbank investing close to $17 billion in WeWork, which crashed and had to be taken over by Softbank.

Television, much like its take-down of Silicon Valley’s fake-it-till-you-make-it culture, has also been unsparing of VC and PE funds: the diet-conscious but mechanistic Laurie Bream in Silicon Valley or the coke-snorting and loyalty-shifting Stewy Hosseini in Succession are some examples. Hollywood screenwriters seem to have discovered a goldmine in the junction between tech startups and VC-PE funds, where the prospect of making money serves too often as an excuse to overlook egregious behaviour.

Rajrishi Singhal is a policy consultant, journalist and author. His Twitter handle is @rajrishisinghal.


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