Start-ups: Vai-Thee-Fuss?. Sacrificing values at the altar of valuations

Just a few months after we had launched India’s first ecommerce company, I walked into yet another Millennium party in January 2000. The electric atmosphere was flush with entrepreneurs, start-ups and unlimited capital. Over drinks and food, as everyone was talking excitedly about the dotcom boom in Silicon Valley, a well-known investor, whom I had never been introduced to before, walked up to me and said, “Hi, I am so-and-so. You must be Vaithee, right? What’s your valuation?” I was speechless at such a brash opening and left the party quickly. The investor in question chased us several times thereafter, but we decided not to do business with a gentleman who had no interest or idea about our business model but just wanted to invest based on valuation.

More than two decades later, not much has changed. Storied venture capital firms continue to invest large amounts at huge valuations in start-ups with poor business models, unstable revenue streams, and low or negative margins. What’s worse, some of these founders quickly become ecosystem gurus, thanks to a fawning media, and start expounding their expertise to other young entrepreneurs on ways to raise large funding rounds at stratospheric valuations for loss-making companies. 

Unfortunately, star-struck founders fall for this and start worshipping the very ground on which the so-called experts walk… until one fine day the music stops and suddenly there’s talk everywhere that the celebrity entrepreneur was just another greedy person with low moral values and that the startup in question was rapidly sliding downhill. 

The Indian start-up ecosystem urgently requires founders with strong moral values. These are leaders who have many sets of people looking up to them — starting with employees and partners, on one hand, to customers and the media on the other, apart from the society at large. 

Business leaders must build their personal brand based on high integrity, and build trust among consumers. Sadly, other than a few exceptions, most of the unicorn founders who are revered by the media as pioneers and innovators show themselves to have feet of clay. What is obvious is that values always get sacrificed for valuations.

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It’s not easy. Start-ups are seen as a route to earning big money in a short period of time, and a bit of corner-cutting is par for the course. There’s also peer pressure. 

While other founders and entrepreneurs with similar profiles and educational backgrounds are seen raising massive funds and becoming unicorns rapidly, it’s hard for an entrepreneur from the same peer group to decide to stay on the straight and the narrow, especially if it means falling behind on the material index. 

I have a simple mantra for entrepreneurs everywhere: Integrity is what you practise when no one is watching. 

(The writer is a serial entrepreneur and best-selling author of the book ‘Failing to Succeed’; posts on X @vaitheek)

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