What TinyOwl ex-employees holding co-founder hostage says about our start-ups
Events at TinyOwl's Pune office on November 5 present a dark portent to India's shining ecommerce story. On the back of funds, many start-ups have rapidly expanded with little preparation in areas of logistics and organisational capabilities. This is what seems to plague TinyOwl, a food delivery app that connects customers with restaurants and provides home delivery.
In September, the company laid off 200 employees and this week sought to lay off another 100-odd when the issue got out of hand and co-founder Gaurav Choudhary was held hostage by disgruntled employees inside the Pune office. As the TOI report cited above notes, this kind of hostage situation is mostly seen in industries where powerful unions prevent managers from leaving the premises until their demands are met. To see this happen at a new-age start-up is not just unexpected but ominous.
The facts of the case made available so far suggest that the employees were demanding that their dues be cleared right away and not 45 days later, as their contracts stipulate. While the management can invoke legality, the truth is that with the rapid expansion of ecommerce, there is little clarity among employees of firms in the space when they might be asked to leave. TinyOwl employees at the centre of the latest crisis spoke of how the bunch laid off in September had yet to receive their full and final payments. Managements looking to be in the good books of their investors use monies to expand rapidly, but equally do not desist from closing down operations when targets are not met. In such cases, there is little concern for the future of the employees caught in the bind, leading to the kind of situation now being seen at TinyOwl.
Most of the laid off employees are from the sales and marketing section, and this makes their story similar to that at the Big Daddy of the Indian food start-up space, Zomato. An email from Zomato CEO Deepinder Goyal leaked this week on Facebook is scathing about the missed sales targets that prompted the sacking of close to 300 employees from the food aggregator website.
"The average number of meetings per day for our sales teams varies from a pathetic one to 3.5 in the best teams - it should be anywhere from five to six meetings a day... I could go on and on," Goyal wrote in his email. While the sales teams of most consumer-facing companies are used to facing the heat, the rapid firings in the food delivery space point to a dark trend.
One reason for the troubles is the sheer glut of companies. Bangalore alone in the recent past has seen the advent of a number of food delivery start-ups such as Red Cooker, Spoonjoy and Fresh Menu. Fresh Menu, for example, runs its own kitchen from where it serves gourmet offerings covering a variety of continental and pan-Asian cuisines. While the market for home delivery of food is rapidly expanding due to double-earning households, there is little clarity on how sustainable a pure delivery model is in a country where home-cooked food continues to command a premium.
Analysing the phenomenon makes it apparent that the problems cannot be chalked down to poor sales performance alone. Most start-ups in the food space, and most start-ups generally, are manned by 20-something IIT passouts who get funding easily due to their pedigree, even when their business model is not down pat. Look at grocery delivery, another area where a surfeit of companies is jostling to make space for itself, engendering growing pressures of customer acquisition and sales targets. Localbanya, a Mumbai-based start-up, is one example of an online grocer that started with much fanfare three years ago, but has now suspended operations for an indefinite period.
Besides, a crisis like the one at TinyOwl gives the investors reason to take charge of the company. This is what happened at Housing.com, whose CEO Rahul Yadav was fired earlier this year after he developed differences with the management. Something similar may happen at TinyOwl over the short term. In the long run, however, the company may simply fold if it cannot find a viable alternative to the shaky food delivery space.
It would be premature to cast aspersions on India's e-commerce story and call it a "bubble" as some analysts are doing. At best, the sector is ripe for a shakeout where smaller players will be bought out by Big Fish such as Flipkart and Amazon. In the meanwhile, we are likely to see more such events as happened in Pune on November 5.