Lobby Group Indiatech To Push For Differential Voting Rights For Indian Founders

Lobby Group Indiatech To Push For Differential Voting Rights For Indian Founders

SUMMARY

The concept of differential voting rights will help founders over strategic decisions

To make the process easier, Indiatech will also form a core group of senior industry names and founding members

Indiatech will implement changes with the help of Government and SEBI

Indiatech, a lobby group that aims to create a level playing field for domestic startups, will now push the agenda of differential voting rights for Indian founders, its new CEO Rameesh Kailasam said in a media statement. Indian entrepreneurs, including Flipkart’s former co-founder Sachin Bansal, have been in favour of differential voting rights for founders.

Kailasam joined Indiatech in August after Indiatech’s former CEO Gyanendra Badgaiyan resigned from the company over differences of opinion in the organisation.

The entire process may take a year before a legislation giving more powers to founders through dual voting rights is approved, reports said.

Multiple ministers, along with the Securities Exchange Board of India (SEBI), will have to get involved to take a decision on the matter; the approval of all concerned authorities is also essential for an approved legal framework on the issue.

Differential Voting Rights: A Fight To Vest More Power With Founders

Differential voting rights are to the benefit of founders who dilute their stake in the company while raising funds. They also help founders exert more power during times of strategic decision-making, even if they have a smaller stake in the company as compared to other investors.

According to reports, Kailasam cited examples of companies such as Facebook and others from the US, in which founders having relatively smaller stakes after dilution get stronger voting rights in the company’s strategic decision-making process.

The Indiatech CEO suggested two key solutions to empower Indian founders:

  • Formation of a core group that will include founding members of the association and senior industry names to initiate discussions with the government and ministries concerned to implement the changes.
  • Invitation of new members — new entrepreneurs and investors — to join the association as well as adding new members through “special invitations”.

Kailasam also gave indications that Indiatech would first approach the government to discuss the matter and not SEBI, which regulates stock markets in India.

Indiatech’s Role In Indian Startup Ecosystem

Indiatech was conceptualised in 2016 when Flipkart’s former co-founder Sachin Bansal decided to create a lobby group focussed on consumer internet startups. The aim was to form a trade association to fight with the government for favourable laws for local companies such as Flipkart and Ola.

It was in October 2017 that Flipkart, Ola, and MakeMyTrip came together to launch Indiatech, which represents the interests of local Indian businesses. During that time, SoftBank, along with others VCs such as Matrix Partners and Kalaari Capital, had also agreed to back the lobby group.

SoftBank had at that time decided to provide its financial and strategic expertise to the Indiatech member companies to help them fight against rivals such as Amazon, Alibaba, and Uber.

However, despite having been around for many months now, Indiatech has not been able to achieve its goal. The lobby group was in news earlier when Amazon India head Amit Agarwal targeted it for advocating a protectionist approach in the Indian startup ecosystem.

In the same direction, Uber’s India head Amit Jain also said that Uber is as Indian as any other local player. The lobby group works to weed out foreign competition but was reportedly taking support from SoftBank, he added.

Recently, the Indian government has also set up a think tank to encourage homegrown ecommerce players and to mull over a domestic policy on ecommerce. The think tank has been set up to examine what should be done domestically to take advantage of the current upswing in India’s ecommerce sector and what can be done to regulate it now and in the future.

Indiatech counts Ola’s Bhavish Aggarwal, MakeMyTrip’s Deep Kalra, and Steadview Capital’s Ravi Mehta among its founding members. However, after the Walmart-Flipkart acquisition, Sachin Bansal and Bengaluru-based ecommerce company Flipkart are no longer a part of the group.

[The development was reported by TOI.]

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