Snapdeal's big exit mess and what we can learn from it

Investors and founders will have to make tough calls, reports Tech in Asia

There is a huge problem looming over start-up investors in India, and not enough is being said about it.

As recently as two years ago, IPOs in India were being looked at as achievable dreams, as was profitability. There were many reports of Flipkart’s listing, none of which have come to pass. By 2016, founder Sachin Bansal was talking about the benefits of being private for as long as possible.

Snapdeal spoke of IPO ambitions even last year. Now, there are talks of whether the company can go it alone, get merged with Paytm, or be bought out by Alibaba. Snapdeal and Alibaba deny a sale.

By the end of 2016, there were multiple media reports that Flipkart and Snapdeal were struggling to raise money at the valuations they want.

Earlier this month, Japan’s Softbank wrote off $$475 million in the value of its combined shareholding in Ola and Snapdeal, two of its largest investments in the country.

Forbes describes a writeoff as "a failed investment, a necessary aspect of the inherently risky business of venture financing". Before that, Softbank had written off $555 million in the two companies.

From all available evidence, it looks like India’s tier one start-ups are heading for a big correction. Investors and founders will have to make tough calls that might include cutting employees, scaling back drastically, and making other moves that will require some swallowing of pride and tunnel vision. Some of it is already happening. On Wednesday, Snapdeal announced layoffs and major changes in its organisation. Grofers, Zomato and a bunch of others have either scaled back ops, let people go, or even changed business models to survive.

This is an excerpt from an article published on TechInAsia. You can read the full story here