Startups Exploited: An Open Letter.

This might be very personal, but I doubt it can be avoided. For the past two years, there has been a lot of time, commitment, travel, stress, energy, and personal money that has gone into a really ridiculous goal – one of creating a culture of oneness, open communication and one where startups stand a chance to win. The mission does go on, and I strongly believe that the journey lies ahead for a few more years, before we can step back and let things slide on its own.

But this is not about what I am doing. This is about what is happening.

They say, that what is nice from far is far from nice. Once you get into the ground, roll up your sleeves and start digging, you start to smell the intentions of a lot of well-to-do people, which kinda make you wonder a lot of things. This post is one of warning for the startup community to take heed from, so that you don’t allow yourself to be exploited mercilessly, by any means.

If we do allow ourselves to be sold, its our fault that we were naive enough to be cheated. People will spot opportunities and will come in the masses to make money out of just about everything. Should they succeed or not, is an option that we as a community have the option to decide on.

I’ll give you a small set of incidences and I’ll let you connect the dots from there.

I was having a conversation with someone over twitter, on what has been the focus of Proto.in lately. We started off as being the “DEMO” of India. Well, I dont remember ever making that statement, but a lot of newspapers and blogging community did use that as an introduction. So the question posed was as to whether we do have folks from DEMO working with us, to take things to “that” level – whichever level that was.

Help From Above:
Well, Did we try? We did. We had a chat with several key executives from the DEMO conference as they were looking at India as a crucial market to step into. They had started a DEMO in China, and they seemed quite pleased with the results, though the Chinese companies were complaining. DEMO Germany has been doing okay as well, I hear. So When they came to India, the first logical choice was to identify local players and I suppose Proto.in surfaced. We had a couple of conference calls, and the intentions were very clear. How to make money. I don’t think that was, is or ever will be our intention, and the clash in intention was obvious. The eventual and final agreement that they came down to was to essentially franchisee the brand “DEMO” to us, and we’d give up our brand and rename ourselves to DEMO India. The franchisee fees ofcourse, was almost a sizeable amount that couldn’t be justified by any means. When I told them that Proto.in was a not-for-profit event, and that we charge 250$ as entry fees for a company (compared to them charging $20,000), the case was obvious. We just never heard from them again. That was DEMO for you. (The one thing I admire about them was that they were frank and to the point that they didnt see a business value in this. Fair enough. And Kudos to them)

Help from Big Brothers:
You wouldn’t believe If I give you the list of corporates which essentially want to tap into the startup community as a mere sales target. If you talk to anyone who runs the sponsorship for Proto.in, we have enough stories to tell about how we shoot down companies, and are extremely picky about how and where we take money from. Every penny comes with its set of liabilities, and if someone doesnt truly care about the community, we don’t want anything to do with them. It’s been a rule. And So far, Thankfully we’ve been amazingly blessed (for lack of a better word) with very generous and kind sponsors who have been the most lenient with the terms that they come with.

But, don’t fool yourselves into thinking that every corporate that is looking at supporting “startups” is looking out with the best of intentions. They aren’t. For most of them, a startup team is two stones in one bird – you get a performing team, and you get a team that has a product which can scale their offerings. All at a price that only they will negotiate and finalize on. Do we need deals like this? Possibly so. India still has yet to see any or many exits, and the impact of it is very much evident in the way ESOPs and Equity are treated. A couple of exits will start providing a reference valuation which will definitely help, but one needs to understand at what cost all this will come. I would hate it if it was my own friends and family who were the subject of such a sacrifice. So do keep that in mind. There is a difference between knowingly going down that route and being squared right in the centre of it.

Understanding our Own Terminologies:
I am not sure if you have noticed, but I have given up on the word “Ecosystem”. Every third guy who has gotten together ten guys in his garage to talk about startups thinks that he is building an “ecosystem”. I have to be so thankful and grateful for the advisory team behind Proto.in, without whom, I doubt I’d have such revelations at times. During one meet, Laura Parkin, the Director of NEN and an incredibly sharp persona, gently posed the question as to what an “ecosytem” entails. It is much more than just startups. It is much more than just technology. Its much more than capital and talent and the industry coming together. There are issues such as government policies, the way the world perceives us, the different issues such as taxation, any benefits we can obtain on that front, government-level financial support, etc etc etc, and there are a gazillion other elements that need to fall in place. Unless, and hear this well, Unless you are tackling all those issues, dont even dare use the word “ecosystem”. I thought about it, it made a lot of sense and decided to listen. I will eventually use the word “Ecosystem”, but not before we get all those other elements as well in place.

Beware the Wolves:
So lets come back to the topic. In the name of “Ecosystem” building, there are going to be quite a few companies which will pop up. There will be everyone from media companies, to magazine publishers, to investment firms launching a whole charade of events under that guise. I would not dare judge, nor tell you what you should do. But I will ask you to do one thing. Judge their intentions. Just ask yourself what is in it for them. Why are they doing the things that they do. Both entities, Proto.in and Headstart.in are non-profit entities and are completely volunteer driven. Our bread and butter doesn’t depend on what we do for the community. We make our living elsewhere and we do this because no one else will, and because we drive this out of passion. But when a business, whose main focus is to be on profitability does something like this, just ask your question as to how they justify it, and what they are planning. If you still think they make sense, please go ahead. But if they are using it as a marketing ploy to increase their visibility, their brand and circulation, and in the process also making some money, all under the name of “Ecosystem building”, I believe you are smart enough to know what to do.

I have a feeling that its the beginning of that moment, when we need to turn on the heat and divide the chaff from the wheat. Very soon.

Sanjay Anandaram has already been talking about the chaff within the VC community as well. I suppose its really going to start soon. The divide between the ones who put their money where their mouth is, and the pretentious.

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