Start-ups beyond the founders: 2023 seems to be the year of changing roles

The funding winter and greater demands for accountability are encouraging promoters to step away from executive roles

If the year 2021 was all about funding exuberance and 2022 about the funding meltdown, then 2023 seems to be the year of founders changing roles or taking a back seat. If it is not founders, then senior executives have chosen to leave start-ups as restructuring and focus of the companies changed.

On Wednesday, ShareChat’s founders Bhanu Pratap Singh and Farid Ahsan stepped down from executive roles at the company, the firm’s Chief Executive Officer Ankush Sachdeva said in an internal note.

Both Singh and Ahsan will continue to be on the company board and the next line of managers will take on the leadership role.

Of course, 2023 started with the most unexpected news of Suhail Sameer, CEO of BharatPe, stepping down from his active role to become an adviser. In a LinkedIn post, he said that he wants to pursue his next journey as a full-time investor.

The change came in as the financial results of FY22 of the company also came out. BharatPe reported that its loss for FY22 touched Rs 5,594 crore. The reason for the loss was due to an accounting norm.

A few days before Sameer’s announcement, Zomato’s Co-founder Gunjan Patidar resigned. Patidar’s exit was different as he was part of the original group of founders (the delivery service has a policy of giving senior executives, who have scaled businesses, the co-founder designation). Zomato was started by Deepinder Goyal, Pankaj Chaddah and Gunjan Patidar. The latter has been with the company since 2008. Company insiders said fatigue and the fact that he had been working without much break was the reason for the exit. Earlier this year, upGrad’s CEO Arjun Mohan quit.

Industry insiders and advisers to the start-up ecosystem that Business Standard spoke to said that there were three or four reasons for the exits. But a crucial reason was the boards asking for accountability.

“Blame it on the funding winter and the resultant restructuring that start-ups have had to do, but the board has also got active. At places boards are suggesting that a company should be run by professional CEOs. In some cases, this may not go well with the founder. This is where interpersonal mismatch of expectations is happening,” said an active investor in the start-up ecosystem.

Many also pointed out that the Indian start-up ecosystem had reached a point where there was a clear distinction between creators and those who could scale up and run a company.

Siddarth Pai, founding partner, chief financial officer and ESG (environmental, social and governance) officer, 3one4 Capital, agreed. “A sign of maturity in a start-up ecosystem is the segmentation of roles — between those who can start companies and those who can scale up and run such companies. At times, these are separate roles. Hence the earlier ‘promoter’-driven culture is fading away. But, of course, there will always be a Vijay Shekhar Sharma for Paytm, Deepinder Goyal of Zomato, Sanjeev Bikhchandani of Info Edge, where the business is intimately linked to the founder and the founder has been built the company from day 1,” he said.

Pai added that there was a clear understanding of skill sets at different stages — early stage, growth, initial public offering, etc. “Venture capitalists are ready to back serial entrepreneurs. These are people who they are comfortable with and they are okay to bet on again. So it makes sense for many to again pursue building a new venture,” said another founder.

The other important development taking place on the sidelines is that VCs are sitting, perhaps for the first time in many years, on a huge amount of dry powder in the shape of unallocated capital. This means they are ready to back founders who have been there and done it.

This trend is best seen in the US where Adam Neumann, the founder of WeWork, despite his shredded reputation as the poster boy of star-up valuations, managed to get the support of Andreessen Horowitz for his new venture. His new venture is called Flow, another real estate venture.

Back to the Indian start-up ecosystem, a mismatch appears to be emerging between interpersonal relations and expectations. Take the case of Udaan, which is much celebrated for its decentralised work culture where none of the three founders wanted to become or create a CEO-driven model. While Vaibhav Gupta, one of the founders, is the CEO now, both Amod Malviya and Sujeet Kumar have taken a step back. The CEO-focus model was driven by the investors.

“The personal dynamics of founders is crucial. In addition, the fatigue of working with a company can get founders to quit as well. More so, if they have spent time doing the same thing for a long time,” said Sanjay Anandaram, co-founder, NICEorg, and an adviser on multiple VC and start-up boards.

Anandaram added that this was true across start-ups globally. “In the US, which is one of the most sophisticated in terms of width and depth of the start-up ecosystem, over time you do not see founders at the helm in more than 90 per cent of the companies. As the company grows, it needs different competencies at different stages of growth, he added.

With the Indian start-up ecosystem reaching a much mature stage, Pai feels that it is time for many to think of building a leadership pipeline. “The challenge is that Indian start-ups have not thought of a transition plan or building the next leadership funnel. This will eventually become the focus and will be driven by the board. Boards are expected to prioritise the company above any individual and act as a rudder for the company. This expectation is becoming more pronounced,” he added.

MOVING ON 

• ShareChat founders Bhanu Pratap Singh and Farid Ahsan have stepped down from executive roles 
• Gunjan Patidar, part of the original founding team at Zomato, resigned recently  after being with the company since 2008 
• UpGrad CEO Arjun Mohan quit this month to pursue another edtech stint 
• Zomato’s senior leadership saw multiple resignations last year, some were designated co-founder 
• Suhail Sameer, CEO of BharatPe, stepped down  from active role this month