Your browser is currently blocking notification.
Please follow this instruction to subscribe:
Notifications are already enabled.

2017 In Review: The Top 10 Controversies That Shook The Indian Startup Ecosystem

2017 In Review: The Top 10 Controversies That Shook The Indian Startup Ecosystem

From Stayzilla Fiasco To Snapdeal Woes, A Rundown Of The Biggest Controversies From The Indian Startup Ecosystem

This article is part of Inc42’s Year-End Stories for 2017 where we’ll highlight the major developments, issues, controversies of 2017 and their impact on the Indian startup ecosystem. Find all the stories of this series here.

“The first rule of change is controversy. You can’t get away from it for the simple reason that all issues are controversial. Change means movement, and movement means friction, and friction means heat, and heat means controversy,” –  Saul Alinsky.

This is particularly true in the context of the Indian startup ecosystem. Although practically non-existent until a few years ago, it has evolved into the third largest ecosystem in the world. It is currently home to over 5,000 tech startups, a number which is expected to multiply by 2.2x to 10,500 within the next three years.

Over the last few years, the Indian startup ecosystem has seen the rise as well as the untimely fall of hundreds of promising startups. The ecosystem has also witnessed reputations being shattered into smithereens; personal lives getting entangling with professional lives and ultimately, ending in antagonism. Sometimes, they have even resulted in major legal battles.

As is their nature, controversies often lead to disastrous endings and downfalls. On the other hand, they also serve as cautionary tales for others in the same boat. If you take a closer look, you will find that controversies, in fact, play a major role in shaping the future.

As we near the end of 2017, we at Inc42 wanted to take some time out to contemplate the year that has gone by and the major controversies that will set the course for the Indian startup ecosystem in 2018.

What were some of the biggest controversies that rocked the Indian startup ecosystem over these past 12 months? Were they avoidable? Did they reach closure or is there more to come out of them?

Let’s take a quick trip down the memory lane of 2017 to analyse some of the biggest, most unsettling and impactful controversies that shook the Indian startup ecosystem this year.

The Biggest Controversies That Shook The Indian Startup Ecosystem In 2017

Stayzilla: Shutdown, Jail Time And The Mysterious Macabre “Dolls”

Stayzilla Founder

One of the most talked about incidents this year was the Stayzilla saga, which exposed the underbelly of the Indian startup ecosystem. It all began in February 2017, when the Bengaluru-based homestay network, Stayzilla, suspended its operations and announced that it was “looking to reboot the company with a different business model.”

Less than a month later, on March 8, Aditya CS, owner of JigSaw Solution and Advertising, filed a complaint against Stayzilla founder and CEO Yogendra Vasupal with the Central Crime Branch in Chennai. This was followed by an FIR with charges of fraud, criminal breach of trust and criminal intimidation on March 13. Within days, Vasupal was arrested on charges of cheating and swindling up to $265K (INR 1.72 Cr).

According to our sources, however, the startup owed a total amount of about $1.38 Mn (INR 9 Cr ) to Jigsaw.

Aditya of JigSaw Solution also claimed that he had proof of the Stayzilla founders syphoning money from the company accounts into their personal accounts as well as into accounts of their own family members, who did not hold any position in the company. He further claimed that, in December 2016, when he had asked the founders regarding the dues, Sachit had criminally intimidated him and threatened Aditya with dire consequences if he continued demanding for clearance of his dues.

This is where things took a macabre turn. Just hours before his arrest, Yogendra had written a blogpost on Medium highlighting the issues faced by him and his co-founder Sachit. The blog highlighted how Stayzilla founders were being harassed by their landlord and vendors demanding money and payback.

From being threatened by henchmen to receiving voodoo dolls with one’s kids’ picture on it, the controversy only got murkier. In a strange turn of events, Inc42 later received a tip from a reader, who shared a screenshot of Jigsaw’s Aditya CS asking around on Facebook for Voodoo dolls. The Indian startup community – from ecosystem enablers to founders to startup media houses – stepped forward calling for his immediate release.

What’s more, a website by the name of ‘Help Yogi’ was created by industry headliners to gain support from the startup community. On March 23, 2017, the Special Metropolitan Magistrate court for CCB-CBCID dismissed Vasupal’s bail plea for the first time. Around that time, Yogi’s family decided to come forward with documents in a blog post supporting and justifying all major flagged transactions, including rental agreements, credit card bills and salary slips of the founders, in order to disprove accusations pitted against them.

Stazyilla Controversy Timeline

The post highlighted that the salaries drawn by Yogi (INR 201,523 gross per month) and Sachit (INR 217,789), despite being the CEO and CFO respectively, were less than what most of Stayzilla’s departmental heads made. It went on to claim that Yogi and Sachit, despite repeated offers from investors and pressure from family members, had not cashed out on even a single share from their holding in the company. The blog post further questioned how a regular civil matter got converted into serious criminal charges.

In spite of the family’s attempts to resurrect Yogi’s impaired reputation, he was denied bail for the second time on March 29. In the first week of April, another bail application was submitted to the Madras High Court. By then, Vasupal had already been in jail for over 22 days.

After being in prison for 25 days, Yogi was finally granted bail by Madras High Court on April 11, 2017, on condition that he would have to deposit about $62K (INR 40 Lakhs) with the court. As per reports, the money was not bail-money, but rather a form of guarantee that Stayzilla and its co-founders had sufficient funds to pay off Jigsaw. A few days later, the Stayzilla co-founder Sanchit Singhi was also granted anticipatory bail.

What happened in the aftermath of the controversies?

As is often the case, the story did not end there. In September, the National Company Law Tribunal bench in Chennai ordered the initiation of insolvency proceedings against the defunct startup. During the insolvency proceedings, the NCLT reasoned that the Indian startup failed to show how the pending criminal case would qualify for consideration.

Post the orders by the NCLT, an Insolvency Resolution Professional was appointed to evaluate the claims of due payment and start the process of liquidation of assets for settling dues.

Later in November, the Supreme Court passed an interim order of status quo in an appeal against the insolvency proceedings of the homestay aggregator. Upon hearing the appeal filed by Stayzilla founder Yogendra Vasupal, a two-judge bench at the apex court granted Jigsaw Solutions a week’s time to respond. Till date, both parties have been ordered to maintain status quo.

Looking back at the Stayzilla-JigSaw fiasco, one realises that there are a few things that the former’s co-founder and CEO Yogendra Vasupal could have done differently to prevent such a catastrophe.

Quite possibly, his biggest mistake was publicly disclosing his weaknesses on social media. He could have maintained his composure by remaining silent. When the controversy first surfaced, his focus should have been to first get himself in a position of bargain. In failing to do so, he invited his enemies to wreak havoc not only on his career but also on his reputation and family.

Paytm Vs Snapdeal Vs GoJavas: Oh The Tangled Web We Weave!

This has not been the year for Snapdeal. There, I said it!

From the fallout of merger talks with Flipkart after months of speculations to being abandoned by one of its biggest investors SoftBank, the once celebrated ecommerce startup has been grappling with losses, controversies, layoffs and setbacks for the entirety of this year.

To add to its woes, over the last 12 months, Snapdeal and its subsidiaries have been embroiled in expensive legal battles with Paytm Mall on the one hand and GoJavas saga on the other. Before we delve into these controversies, let’s take a quick recap of the much-anticipated Flipkart-Snapdeal merger, which was ultimately abandoned amidst shareholder uncertainty.

Snapdeal-Flipkart: A Failed Merger That Led To Snapdeal’s Infamous Layoffs

Flipkart Snapdeal Merger

Quite possibly the biggest newsmaker in the Indian startup ecosystem in 2017 was the highly-anticipated Flipkart-Snapdeal merger, which fell through despite SoftBank’s continued efforts. Speculations about the Flipkart-Snapdeal merger first surfaced in March 2017, when SoftBank started seeking out buyers.

Once valued at $6.5 Bn (in February 2016), Snapdeal has been struggling to remain afloat amidst increased competition from rivals Flipkart and Amazon. In April 2017, the Indian startup suffered another blow when its valuation fell to $1 Bn.

In the same month, SoftBank proposed a merger between Snapdeal and homegrown ecommerce unicorn Flipkart. In May, the two signed a non-binding Letter of Intent, following which negotiations began. For two months after that, Flipkart was conducting due diligence on Snapdeal, for evaluating its assets and liability profile.

Originally in June, Flipkart reportedly made a $300 Mn-$400 Mn acquisition offer, which Snapdeal promptly rejected. During the first week of July, it was reported that Snapdeal once again rejected Flipkart’s $700 Mn – $800 Mn buyout offer, asking for a slightly higher $900 Mn instead.

A week later, Flipkart upped its acquisition offer to $850 Mn. At the time, Snapdeal reportedly approved the $900 Mn-$950 Mn merger offer and was awaiting shareholders’ approval.

Soon afterwards, however, the merger talks between Flipkart and Snapdeal fell through after Snapdeal founders – Kunal Bahl and Rohit Bansal – as well as early-stage investor Nexus Venture Partner and minority shareholders like PremjiInvest expressed reservations against the proposed deal.

This was the one part of the entire story. While negotiating terms of the deal. Snapdeal repeatedly made headlines due to rumours about layoffs and downsizing. Between February-March 2017, as part of a cost-cutting exercise, Snapdeal reportedly laid off over 30% of its workforce or 1,000 people, with 600 being eliminated in February alone.

Around that time, in an attempt to cut costs and conserve cash, the Indian startup also pulled the shutters on its app-only, zero-commission, affiliate marketplace Shopo.

Snapdeal Flipkart Merger Timeline

In April, Snapdeal made news once again when it vacated its 90-seat office at a co-working hub in Andheri in Mumbai. At the time, it was reported that the company was in the process of vacating its offices in Gurugram as well. In May, while Flipkart was conducting due diligence on Snapdeal, the latter reportedly initiated payouts to the employees it had laid off two months back.

Post the breakdown of merger talks, on August 1, it was reported that the Kunal Bahl and Rohit Bansal-founded startup was gearing up to dismiss around 80% of its employees.

In the second week of the same month, former and current employees of Snapdeal anonymously floated a joint letter to co-founders and also addressed it to the PMO, accusing them of not letting the merger go through for ‘personal motives’.

Snapdeal Vs GoJavas

The spat between Snapdeal parent Jasper Infotech and Quickdel Logistics, the owner of ecommerce logistics company GoJavas, started in June this year. On June 23, Snapdeal filed an FIR against GoJavas with the Economic Offences Wing of the Delhi Police.

The complaint was filed on charges of cheating, forgery, conspiracy, criminal breach of trust and criminal misappropriation of valuable securities and for defrauding Jasper Infotech to the tune of crores of rupees. As per the complaint, in 2014, the promoters of Quickdel had offered its services to Snapdeal.

Based on the representations and assurances given by the promoters of Quickdel, the two companies entered into a Master Logistics Services Agreement (MLSA). The FIR further specified that the representations mentioned at the time of the agreement by Quickdel were however false.

Later on, the Jasper Infotech-owned Indian startup received information that the GoJavas management was defrauding them. Based on the reports of these fraudulent activities, Snapdeal initiated an inspection into Quickdel accounts and had engaged KPMG for the same. A report submitted by KPMG in August 2016 reportedly shed light on the illegal, inflated and excess payments made by Quickdel to non-existent persons.

Snapdeal Vs GoJavas

In October this year, GoJavas sent Jasper Infotech a $45.8 Mn (INR 300 Cr) legal notice, this time on allegations of criminal breach of trust. In addition to alleging that Snapdeal syphoned money off GoJavas to its in-house logistics arm Vulcan Express, Anand Rai of GoJavas accused the ecommerce platform of stealing confidential business information like data about employees and service vendors.

According to him, the Snapdeal parent discontinued its contract with GoJavas to drive Vulcan Express’ growth.

A few weeks later, the logistics company filed a fresh complaint against Jasper Infotech and its logistics subsidiary Vulcan Express. Most recently, in November, Snapdeal gave Quickdel a time period of three days to withdraw its allegations and claims. GoJavas refused to comply. Whether the two companies can reach a resolution will get unfolded in the months to come.

Snapdeal-Owned Unicommerce Vs Paytm Mall

Founded in 2012, Unicommerce is an ecommerce SaaS solutions startup that was acquired by Snapdeal for an undisclosed amount in March 2015. The tussle between Paytm and Unicommerce dates way back to April 2016.  The digital payments giant filed a lawsuit against the SaaS platform for accessing confidential business data on its (Paytm’s) ecommerce platform via the sellers on this platform.

At the time, Unicommerce was used by many sellers on Paytm’s platform for order management and inventory across multiple marketplaces and carts. In its complaint, Paytm also alleged that Unicommerce was using its logo and name without any authorisation.

Unicommerce Vs Paytm

Within a week, Delhi High Court reportedly put a stay order on Unicommerce from using any data or information derived from the sellers of Paytm. The court had also ordered Unicommerce to pull down its YouTube advertisement and/or modify it to remove the Paytm logo.

At that time, the Unicommerce spokesperson had also stated that Paytm’s plea for an injunction against the use of its logo wasn’t granted since Unicommerce confirmed in court that it had discontinued the use of the Paytm logo since December 2015. It agreed to be bound by its current practice and not use the same in the future as well.

After nearly 18 months of lull, Paytm reportedly withdrew its lawsuit against Unicommerce, only to reopen it two weeks later. As stated by COO Amit Sinha at the time, the case was being transferred to the purview of Paytm Mall, since Paytm was no longer in the business of ecommerce.

True to its words, Paytm Mall announced plans to take legal action against the technology solutions arm of Snapdeal for alleged data misuse. In the aftermath, Paytm Mall also warned sellers on its platform about availing services provided by Unicommerce, which could result in either termination of the contract or even legal action.

Meanwhile, in August, Unicommerce made headlines when four of its founders, Ankit Pruthi, Karun Singla, Vibhu Garg and Manish Gupta, stepped down two years after being acquired by Snapdeal’s parent company Jasper Infotech. As per the original agreement between the two parties, the latter’s founders were required to stay in their roles for a minimum of two years following the acquisition.

What happened in the aftermath of the controversies?

For Snapdeal, these are all ongoing battles. Post the fallout of merger talks with Flipkart, Snapdeal received another blow when one of its biggest investors SoftBank jumped ship to pour a staggering $2 Bn-$2.5 Bn funding in Flipkart.

It is currently set to pick up 20% stake in the ecommerce giant, once it acquires a portion of Tiger Global’s share in Flipkart. For Snapdeal, however, it will be a lonely voyage as an independent entity. Its survival in the current ecommerce climate will depend not only on the quality of its services but also on the competition from bigger, more affluent rivals like Amazon and Flipkart.

If the legal battles with Paytm Mall and GoJavas draw out, it could spell an even bigger catastrophe for Snapdeal. Lawsuits, in general, are an expensive affair. For cash-strapped Snapdeal, however, it would only make it more difficult for its founders to find a way out of this plight and stay focused on its growth path towards building Snapdeal 2.0.

TVF’s Arunabh Kumar And The Sordid Tale Of Debauchery

Arunabh Kumar

“I am a heterosexual, single man and when I find a woman sexy, I tell her she’s sexy – but this is only done in my personal capacity. I compliment women in my personal space and not at the workplace. Is that wrong?”

This was The Viral Fever co-founder Arunabh Kumar’s retort when over ten women came forward accusing him of sexual misconduct at the workplace. Conceited as it sounds, Kumar’s response to the controversy did nothing to help his case.

It all started on March 11 this year, when an anonymous Medium user by the cheeky name of Indian Fowler published a post implicating Arunabh of molestation and harassment. After she raised her voice through her blogpost (has been taken down by Medium) titled “The Indian Uber – That Is TVF,” nine other women came forward and made similar allegations against Kumar.

TVF’s initial response was that of denial. It refuted the claims in a similar Medium post, stating “All allegations are categorically false, baseless and unverified. We take a lot of pride in our team and in making TVF a safe workplace that is equally comfortable for women and men.”

Four days after the reports first came to the forefront, a third party police complaint was filed by lawyer Rizwan Siddiquee, requesting an FIR against the TVF boss for indulging into various “willful, criminal, vulgar and continuous acts of sexual harassment at workplace”.

A week later, Arunabh was reportedly asked to record his statement at the MIDC Police Station in Andheri. In an unsettling turn of events, on March 29, it was reported that the Mumbai Police was likely to close the probe as no victim had come forward even 10 days after the report was first lodged. Within hours, however, the tables turned on Kumar.

Arunabh Kumar Case Timeline

At the time, an FIR was filed against him for sexual harassment and insulting the modesty of a woman through indecent words, gesture or acts. The identity of the woman who filed the complaint remained undisclosed. The FIR opened Arunabh’s can of worms. A day after the first FIR was filed on March 30, a second FIR was issued against the TVF co-founder at the Versova police station.

Despite two attempts by the police to arrest him, Arunabh remained untraceable. As per reports, a police team had gone to Kumar’s home in Yari Road, Andheri West, to arrest him the first time around, but could not find him. They made another attempt a few days later and Kumar was unsurprisingly still missing.

A couple of days later, the then TVF CEO was given interim relief by the Dindoshi Sessions Court. According to some media reports, Kumar moved to the sessions court soon afterwards for an anticipatory bail.

What happened in the aftermath of the controversies?

In a report that followed a month later, FactorDaily unmasked TVF’s “dude-bro” culture that is reminiscent of the IIT hostel culture. This is “where guys are always talking dirty about the few girls around and have no clue how to interact with women as equals,” stated the report. In TVF’s male-dominated team, women were treated as “diversity candidates”, who were judged on the basis of their looks and attractiveness.

There were not-so-secret jokes about virginity. According to the report, drugs flowed freely in TVF’s office parties, where hash brownies were commonly distributed among employees. In short, it was an environment where licentiousness was celebrated and male employees were given the freedom to fully indulge in their chauvinism.

Fast forward another month and Arunabh Kumar stepped down from the position of TVF CEO in the aftermath of the sexual harassment allegations. Kumar posted a letter on his Twitter account explaining the decision. He said,

“In the wake of the recent personal attacks, what really breaks me is the blemish on the brand’s true promise. I have therefore taken the decision to step down as the CEO of TVF.”

At the time, it was announced that Dhawal Gusain would be replacing him.

When news of Kumar’s sexual misconduct first surfaced in March, Uber’s sexist culture was already something that was taking the world by a storm. If you look closer, the narratives were chillingly similar – both starting with a Medium post. In Uber’s case, it was former software engineer Susan Fowler who, in a Medium blog post, revealed how she had been propositioned by her manager.

In both the cases, at the centre of the controversy was a company being driven at a breakneck speed, by few people with immense power.

OYO+ZO Rooms: A Deal That Never Was

OYO And Zo Rooms Failed Deal

Quite possibly one of the longest controversies in the making, the acquisition deal between OYO and ZO Rooms that ultimately fell through in October this year indeed makes for an interesting read. So, let’s do it justice and set the stage properly.

It was in December 2015. The Indian startup ecosystem was abuzz with speculations about ZO Rooms’ takeover by OYO. It was reported that the budget aggregator OYO was to acquire the smaller rival ZO Rooms in an all-stock deal. As per a media report, the deal, an asset sale, had been structured in a way that Zo Rooms’ seven founders and investors including Tiger Global would get a combined 7% stake of OYO.

Immediately afterwards, however, rumours of dispute surfaced. The report dated December 18, 2015, stated that ZO’s founding team would exit the company after the transition was complete. Sources also revealed that Zo’s existing investors were not keen on extending investments with ZO Rooms, which in turn led the company to seek more avenues.

Inc42 had reported at that time, was the deal was going through hiccups.

Despite these conflicts, in February 2016, Zo Room’s website was pulled down, hinting at the proposed merger. At the time, it was reported that the companies were almost in the final stages of the deal and that there would be an official announcement soon.

SoftBank had also made a disclosure in its earning report about the OYO-ZO deal and had confirmed the acquisition, even though the deal was still in process and papers had not been signed yet.

OYO Zo Rooms Timeline

However, as expected, more stories around the hiccups in the deal emerged in April 2017. It was reported that OYO’s early investor VentureNursery was demanding access to information that large investors typically receive from a company as well as the right to exit from the combined entity at a predetermined valuation, which was quoted to be $700 Mn.

Putting an end to nearly two years of speculations, the Indian startup OYO recently confirmed that it was no longer involved in talks with ZO Rooms for a potential acquisition. As per the official statement, “In late-2015, OYO explored a potential acquisition of Zo Rooms. The non-binding term sheet for this deal already stands terminated in September 2016. Following this, we tried to identify potential value in their business but could not reach an outcome. We can now confirm that OYO has ended all discussions on the matter.”

What happened in the aftermath of the controversies?

Almost immediately after our story “No Deal: OYO Zo Rooms Acquisition Deal Never Happened, Confirms OYO” went live on October 27, 2017, Zo responded, claiming that OYO had actually acquired the entire “ZO Rooms business by March 2016”.

It seems now that at the time of the announcement, OYO might have been interested in taking over ZO Rooms as a means to consolidate its space in the budget hotel category as well as get the deep-pocketed New York-based investment fund Tiger Global onto its cap table.

However, with ZO Rooms lagging behind OYO and waning interest from Tiger Capital, it seemed the acquisition made little or no sense for OYO, which raised $250 Mn Series D funding in September from SoftBank. This was followed by OYO raising another $10 Mn from China Lodging Group Limited.

Well, it’s still unclear how Zo Rooms is going to handle this situation, it should be noted that the two of the founders of Zo Rooms have already moved out of the company. Going by the LinkedIn profiles of the co-founders of Zo Rooms, we found that Paavan Nanda is co-founder at WinZo Games since November 2016 and Siddharth Janghu is listed as Head of Growth at

Another interesting thing to note here is that, although Zo Rooms website has been pulled down, its parent company Zostel is still up and running!

Aadhaar, Ola And The Saga Of Qarth Founder Abhinav Srivastava

The controversy surrounding Ola employee and Qarth Technologies founder Abhinav Srivastava first surfaced in July this year when he was arrested by Bengaluru’s Central Crime Branch on charges of Aadhaar data theft. According to the complaint, Srivastava illegally accessed UIDAI data through an “Aadhaar e-KYC verification” mobile app that he developed himself.

According to Ashok Lenin, Deputy Director of UIDAI’s regional office at Bengaluru, between January 1, 2017 and July 26, 2017, the IIT Kharagpur graduate allegedly tapped into the UIDAI database and used confidential e-KYC details without permission. Further inquiries revealed that Srivastava had developed a mobile app that provided “Aadhaar e-KYC verification” by accessing data hosted in the National Informatics Centre (NIC) server.

The data theft was perpetrated by hacking into a government-run e-hospital server. Srivastava reportedly earned $628 (INR 40,000) from ads displayed on the app which, in turn, had over 50,000 downloads.

Ola, Aadhaar And Qarth Founder

Later in police custody, Srivastava was later asked to give a six-hour step-by-step demo to sleuths of how he managed to hack into the Aadhaar website. In his demonstration, he stated that he had taken advantage of the lack of Hypertext Transfer Protocol Secure (HTTPS) in the URL of the Aadhaar website.

The UIDAI did not come forward with another statement after the reports of Abhinav Srivastava giving a hacking demo made the rounds. As per the last known report on the subject, the police were so impressed by Abhinav’s hacking skills that they were actually looking to hire him as a cybersecurity consultant. His services, however, come with a hefty price tag. According to the report, at Ola, he was earning upwards of $65,497 (INR 42 Lakh) per year.

What happened in the aftermath of the controversies?

So, how is Qarth or the breach related to the Indian startup Ola? To get to the bottom of this, we first need to retrace our steps and find out what Qarth actually is.

Founded in 2012 by Abhinav Srivastava and Prerit Srivastava, Qarth’s chief product was a mobile payments app called X-Pay, which is a multi-bank IMPS mobile payment application. In March of last year, it got acquired by cab aggregator Ola, in a bid to bolster Ola’s mobile wallet service, Ola Money.

This is where things get dicey. Once the news of the data theft emerged, Ola promptly denied any involvement in the crime. Ola denied involvement in any such activity. In fact, Srivastava claimed that the X-Pay app ceased operations in March last year, post the acquisition by Ola.

Although Srivastava’s data theft charges likely had nothing directly to do with Ola, the controversy only managed to tarnish Ola’s already impaired reputation. In recent times, the cab aggregator Ola has already been embroiled in several scandals, involving drivers protests, driver scams, widening losses and conflict with majority stakeholder SoftBank.

The controversy has also brought to light the vulnerabilities and risks that continue to cripple the Aadhaar system, despite the government’s repeated assurance that Aadhaar data is safe. In the months since the news of Qarth’s data theft emerged, several government websites have reported Aadhaar breaches of one or the other form.

When Swiggy’s House Of Cards Came Crashing Down

Swiggy Vs Ex Employees

One of the biggest controversies in the Indian startup ecosystem in 2017, ironically, spanned just two days! And it was the feud that went down between Swiggy and its former employees.

Towards the end of July, a Tumblr blogpost titled “Swiggy, A House Of Cards” was published anonymously, marking the start of a fracas that refuses to leave Swiggy’s shadow to this day. In the article, four individuals, who claimed to have worked for the online food delivery startup, wrote in detail about the business practices adopted by Swiggy.

They alleged that the company was cheating its restaurant partners by rapidly increasing commissions and violating contractual obligations and promises made to partners. Additionally, they accused the Indian startup of cheating users by planting good reviews on social media and deliberately hiding genuine reviews.

The whistleblowers further stated that the management was aiming to take the average commission rate to 30% in 2022, a number at which small restaurants will bleed “because the big guys will never pay anything more than 20%.”

As claimed by the former Swiggy employees, the company had even lied to investors about its order volumes during its latest fundraise, which took place in May this year. According to them, the food delivery startup had actually seen a dip in order volumes in January 2017, compared to December of last year.

Instead of presenting the actual numbers, the writers of the blogpost claimed that a linear growth curve was shown to Swiggy’s investors, which include South African Internet conglomerate Naspers, and VC firms SAIF Partners and Accel Partners, among others.

Ironically, the blog surfaced on the same day that foodtech startup Swiggy was honoured among the top nine Indian startups at The Economic Times Startup Awards 2017.

Swiggy Vs Ex Employees Timeline

What happened in the aftermath of the controversies?

In the aftermath, Swiggy co-founder and CEO Sriharsha Majety responded to the allegations in another blogpost, where he said that the anonymous employees had falsified the data and details. In order to prove this, he also shared Swiggy’s growth numbers till January 17, adding that the numbers had been verified by external, neutral auditors (a part of the big four) as a part of standard due diligence that is done before every fundraise.

The post also stated that Swiggy did not lie about its market share or order numbers and the commission the foodtech startup currently charges is a fraction of the value it generates for the restaurant.

According to Majety, Swiggy’s revenue per order is a blend of three parts, the commission the company receives from the restaurants, the delivery fee charged from the consumers and discretionary advertising revenues. He also refuted the claims made by the former employees about investors and making false promises to employees.

While the controversy was big enough to knock enough the biggest players off their feet, Swiggy miraculously lived to tell the tale. In the months since then, the food delivery startup has been introducing new products and services.

The Indian startup recently announced the launch of a strategic initiative aimed at reaching more customers and making its delivery more seamless. Dubbed as Swiggy Access, the new service will allow restaurant partners to set up kitchen spaces in areas where they do not have a physical presence. The Indian startup also onboarded former PepsiCo executive Vishal Bhatia as the CEO of its New Supply business and ex-OLAM Divisional CFO Rahul Bothra as its first ever Chief Financial Officer.

The Indian startup has acqui-hired Bengaluru-based gourmet Asian food startup 48East, in a bid to broaden its senior leadership. Swiggy clocked 4 Mn orders in July 2017 with a steady increase since and has partnered with more than 20,000 restaurants so far. In the last few months, Swiggy has also garnered a lot of investor interest, with biggies like Chinese firm Tencent, Japanese conglomerate SoftBank and Flipkart eyeing to pump $200 Mn-$250 Mn in the foodtech platform.

Increasing Troubles In The Already Strained Indo-Chinese Relations

China and India. The relation between the two has always been somewhat strained, due to a myriad of socio-political and economic reasons. The relations strained further this year as a result of the Doklam standoff, which took place between June and August.

Subsequently, the increasing political tension between the countries trickled its way into the startup ecosystem. In March, for instance, one of Oppo’s Chinese employees allegedly disrespected the Indian national flag at its Noida-based office. As complained by the people on the site, he “tore the national flag and dumped it in a dustbin.”

The controversy soon reached social media, which was abuzz with slogans like as ‘boycottoppo’, ‘banoppo’ and ‘nationalism’. Furthermore, a mob gathered outside Oppo’s Noida office, demanding the arrest of the concerned official.

Along the same lines, in August, the Swadeshi Jagran Manch (SJM), the economic wing of RSS (Rashtriya Swayamsevak Sangh), initiated a campaign against Paytm because it is backed by Chinese investor Alibaba. As part of the protest, the Hindu right-wing group asked people to stop using the digital wallet and also urged the government to ban Chinese investments in Indian companies to avoid economic and security concerns.

Apparently, it looked more like a propaganda against Paytm, since it’s not the only Indian startup backed by Chinese investors.

Indo-China Issues

Only a few weeks later, the Indian government launched a review of Chinese import regulations, in a bid to rule out any possibilities of data leak. To that end, the government ordered mobile phone manufacturers to outline their security and privacy processes. As per reports, the IT ministry wrote to 21 mobile phone manufacturers.

Out of this, the majority were Chinese companies such as Oppo, Vivo, Xiaomi, Lenovo, and Gionee, among others. The ministry, in its directive, warned of severe penalties if stipulated processes were not being followed.

Around the same time, Alibaba-owned UCWeb browser also came on the government’s radar for suspected leak of data of Indian users. The matter was taken up by Hyderabad-based Centre for Development of Advanced Computing (C-DAC). According to an official statement of the Ministry of Electronic and IT, UCWeb was capable of stealing data even after the app had been uninstalled.

What happened in the aftermath of the controversies?

For Chinese smartphone makers operating in India, a resolution still remains elusive. Recently in November, the Indian Defence Ministry sent out an order to troops stationed on the Indo-Chinese border to uninstall all Chinese apps from their smartphones. The order came amidst rising fear that these apps are transmitting data back to servers located in China, and eventually passing them on to the Chinese government.

In the advisory, the Indian government reportedly included a list of 42 Android and iOS apps that the soldiers should be wary of. Among these were Weibo, Wechat, UC Browser, and CM Browser, UC News, MI Community, etc.

Furthermore, the Indian government recently increased import tax on an array of electronic products, including mobile phones and television sets. While the primary goal is to bolster the domestic electronics industry, the move could also help curb supplies of smartphones from other countries, in particular, China.

The Rise And Fall Of Amit Singhal

Harvey Weinstein, Kevin Spacey, Matt Lauer. Powerful. Charismatic. All men of incredible talent.

However, there is something else that’s common to all three and many more. And that’s sexual harassment. While not as well known, Amit Singhal is another disgraced soldier, who was forced to leave Uber for non-disclosure of prior sexual harassment allegations in February this year. Before we get to the “fall” though, let’s see what brought Singhal to the limelight in the first place.

In February 2016, Singhal, who previously worked with Google at various positions including Head of Google Search, left the company after over 15 years there. Later in October of the same year, ecommerce and digital payments platform Paytm announced that Amit had joined its Board of Directors. At the helm of his career, in January 2017, Singhal announced on his blog that he was joining Uber as SVP of Engineering.

He was to head up the Maps and Marketplace departments at Uber, while also advising CEO Travis Kalanick and Uber VP of Engineering and Otto co-founder Anthony Levandowski on their efforts to build out Uber’s self-driving technology.

Amit Singhal Fallout

But Singhal’s excitement was not meant to last long. Only a month later, Uber founder Travis Kalanick asked Amit to step down after it came to light that he had failed to disclose a sexual harassment allegation made against him at former employer Google during the hiring process.

As per a Recode report, the female employee who filed the formal complaint against Amit did not work for him directly but worked closely with the Search team.

This is where the plot thickens. Turns out, Google was prepared to fire him over the allegations after looking into the incident. However, Amit resigned soon afterwards, citing retirement as the reason. He had said at the time,

“As I entered the fifteenth year of working at Google, I’ve been asking myself the question, ‘What would you want to do for the next fifteen?’ The answer has overwhelmingly been: give back to others.”

What happened in the aftermath of the controversies?

Soon after reports of his ousting from Uber surfaced, Amit released a statement, denied all the allegations pitted against him. He had said, “Harassment is unacceptable in any setting. I certainly want everyone to know that I do not condone and have not committed such behaviour. In my 20-year career, I’ve never been accused of anything like this before and the decision to leave Google was my own.”

For Uber, this is another blemish on its already-sullied image. While Uber’s CEO Travis was quick to mitigate the controversy surrounding Amit Singhal, the company previously has been known to be not very proactive in HR matters.

Much of this has been on account of the fact that Ube has been reeling under the impact of the devastating blog post of a former software engineer, Susan Fowler, who revealed that she had been propositioned by her manager and that the company had protected him because he was a “high performer”.

Less than four months after this episode, Travis Kalanick was coerced to resign in June 2017, amidst growing investor pressure, with former Expedia Chief Dara Khosrowshahi taking his place as the new CEO of Uber.

Sharad Sharma And The Art Of Internet Trolling

“Do you guys know what India’s soft power is today? It is trolling,” – comedian Aditi Mittal.

However, for iSPIRT co-founder Sharad Sharma, the act of trolling backfired, landing him in a world of trouble. The date: May 17, 2017. Kiran Jonnalagadda, co-founder of Internet Freedom Foundation (IFF), revealed in a series of tweets that @Confident_India, one of the anonymous accounts arguing in favour of Aadhaar and attacking its critics on Twitter, was actually being operated by none other than Sharad Sharma.

Kiran, famous for being one of Aadhaar’s most vocal critics, also revealed, in a detailed Medium post, how he investigated the rise of anonymous Twitter accounts and trolls responding to critics of Aadhaar. As it turns out, at the 27th Fellows meeting of iSPIRT, a plan was hatched to respond to critics of India Stack, which involved the use of trolls.

Sharad Sharma And Aadhaar Controversy

A group called Sudham created earlier, divided people who were broadcasting different views on Aadhaar, into different categories and then underlined various proposals on dealing with them.

So, how did he uncover this masterplan? Kiran claims to have used Twitter’s account reset option on Confident_India with Sharad Sharma’s number to see if it is was accepted. And, voila! It accepted Sharma’s digits without issue. This was further corroborated by many other Twitter users. Medianama’s Nikhil Pahwa (and co-founder of IFF) also confirmed the same, tweeting that the troll account linked to Sharad Sharma.

At the time the news surfaced, Sharad had completely denied that he was tweeting from an anonymous account. Within a few days, however, Sharad apologised for the anonymous trolling on Twitter. “There was a lapse of judgement on my part. I condoned tweets with uncivil comments. So I’d like to unreservedly apologise to everybody who was hurt by them,” the apology stated.

What happened in the aftermath of the controversies?

In the aftermath of the controversy, the software products think tank announced that it had shut down ‘Sudham’, the alleged programme sanctioned by the organisation to troll anti-Aadhaar activists. Due to the negative implication of the episode, key iSPIRT members were also reportedly distancing themselves from the organisation.

In an official statement titled “The End Doesn’t Justify The Means: A Public Statement”, Sharad Sharma stated that iSPIRT had created an iSPIRT Guidelines and Compliance Committee (IGCC) to investigate the controversy.

The controversy surrounding Sharad Sharma only managed to intensify the long-standing debate over Aadhaar. While many have argued that enforcing the use of Aadhaar is an infringement of privacy, the recent security breaches and theft of Aadhaar data have brought into question its validity.

Lastly, The-Ones-Who-Shall-Not-Be-Named

While most of you might be aware of this rather public spat between the husband-wife duo behind a well known Indian unicorn. You must be wondering why are we refraining from naming this company or the people involved in this spat? Well, the company had sent us a legal notice restricting us from mentioning the company or the founder’s name. (Hint: It’s a company in the ecommerce space).

The husband accused his wife and co-founder of tricking him into giving away his ‘voting rights’ in the startup and also, of an illicit extra-marital affair with the third co-founder of the company. In his rant, he further accused his wife of intentionally and deliberately kicking out other founding team members from the company.

The husband went against his estranged wife and co-founder and filed an FIR. In his complaint, he accused the duo of usurping the company from him. The main allegation in the FIR revolved around forgery, cheating and the “subsequent misappropriation of funds”. Just two days later, the court passed an order forbidding any coercive action against the two!

Well, the case is still ongoing and it doesn’t seem like it is going to end anytime soon.

Summing Up

All publicity is good publicity, some say. While it might be true to some extent, often times, controversies do much more than just malign one’s reputation. As can be seen from these above-mentioned examples from the Indian startup ecosystem, few have managed to survive the storm and make a comeback. The significance of controversies, however, lies in the fact that they initiate discourse on a topic that needs to be discussed.

In the words of the surprisingly witty 90s rapper and poet Tupac Shakur, “Out of anger comes controversy, out of controversy comes conversation, out of conversation comes action.”

While these were some of the biggest controversies that shook the Indian startup ecosystem this year, we have many more interesting stories in store for our 2017 In Review Series. So, stay tuned for the next story – the hot sectors of 2017 in the Indian startup ecosystem.

Message From Our Partner

Gain insights from sessions designed for your role and industry with AWS Summit Online 2020.