From BharatPe To BYJU’S: Startups At The Centre Of Controversies In 2022

From BharatPe To BYJU’S: Startups At The Centre Of Controversies In 2022


From allegations of financial irregularities and sexual harassment to accusations of unethical marketing tactics, controversies shook the foundations of some of India’s most promising startups in 2022

While VC firm Sequoia India saw its multiple startups involved in controversies, the BharatPe-Ashneer Grover saga refused to end

Zomato’s acquisition of Blinkit raised a lot of questions, while every move of BYJU’S was closely scrutinised and stirred up new controversies

2022 was a year of turmoil for the Indian startup ecosystem. Amid the funding winter and macroeconomic pressures rattling the startup ecosystem, many startups were also involved in controversies that erupted during the year – 2022. From allegations of financial irregularities and sexual harassment to accusations of sales malpractices and unethical marketing tactics, these controversies shook the foundations of some of India’s most promising startups and left a lasting impact on the industry.

From the ugly spat at BharatPe to the backlash against BYJU’S, the controversies of 2022 shed light on the inner workings of India’s startup ecosystem and the challenges that startups must navigate as they strive for success. The controversy at Metaversity between cofounders Manish Maheshwari and Tanay Pratap, which ended in Maheshwari quitting the startup, also highlighted the importance of a shared vision among the leaders.

Download Annual Funding Report 2022

From the most-discussed Uber Files and Twitter Files to the income tax raids on B2B ecommerce startup Infra.Market and Zetwerk, tech startups were involved in a myriad of issues in 2022.

While some controversies may be the result of genuine wrongdoing or unethical behaviour, others may be the result of misunderstandings or miscommunications. As such, it’s important for startups to be transparent and accountable when it comes to addressing disputes and taking steps to prevent them from happening in the first place.

Now, let’s take a look at some of the startups embroiled in controversies in India in 2022:

A Book, Tense Relationships And Immaturity: The Ashneer Grover & BharatPe Controversy

A Book, Tense Relationships And Immaturity: The Ashneer Grover & BharatPe Controversy

One of the biggest controversies of 2022 has been the ongoing legal and verbal battle between fintech startup BharatPe and Ashneer Grover. While Grover often takes to social media to raise questions about the startup and its executives, BharatPe has decided to take the legal route.

Grover has been making headlines with the launch of his book, Doglapan, which, according to him, has caused panic among BharatPe executives. On the other hand, BharatPe has launched a multi-pronged legal attack against Grover and his wife Madhuri Jain.

The fintech startup has filed a civil suit seeking INR 89 Cr in damages from Grover and some family members and sought an injunction to prevent Grover from making derogatory comments about the company. Besides, it has also filed a criminal complaint against Grover and his wife. 

The web-series-worthy drama started with a leaked audio recording of Grover abusing a Kotak Bank employee. It then spiralled into tense relationships with other BharatPe executives, and financial investigations, with even routine company parties being termed as ‘orgies’ – a turn of events no one would have guessed. 

Ankiti Bose Leaves Zilingo Amidst A ‘Witch Hunt’

Ankiti Bose Leaves Zilingo Amidst A ‘Witch Hunt’

As if the challenges posed by the Covid-19 pandemic were not enough, the year 2022 saw fashion startup Zilingo launching an internal investigation into its financial practices. As the investigation progressed, tensions within the company increased. The drama was a classic example of how investors and stakeholders realised there were problems only after it was too late.

It was followed by a leaked audio clip, which was alleged to have voices of the startup’s founder Ankiti Bose and Sequoia India’s Shailendra Singh (the authenticity of the audio was never proven), sexual harassment cases, flailing business, creditors recalling their loans, and Bose’s termination following allegations of financial irregularities and an investigation. 

Bose denied any wrongdoing and hired an attorney to defend herself against what she called a ‘witch hunt’. She claimed that she was being unfairly blamed for decisions and practices that were known to senior managers and directors all along.

Forensic Audit At Trell & A Seething Letter By Cofounder 

Forensic Audit At Trell & A Seething Letter By Cofounder 

The year 2022 showed that the relationship between the founders of high-growth startups and investors can often be strained, as was the case at BharatPe and Zilingo. And social commerce platform Trell was another addition to this list.

The controversy at Trell began with a group of investors commissioning a forensic audit at the startup for alleged financial irregularities. The audit by EY India found that 18 merchant-like entities received cash advances totalling up to INR 150 Cr. The finding of the audit also impacted the startup’s proposed $100 Mn funding round. 

The issue gathered further steam as Trell cofounder Pulkit Agarwal wrote a scathing letter to the startup’s investors saying the cofounders would not take a hit on their reputation lying down and would take steps to protect the interests of the startup if needed. 

Delay In Filing Financials, Criticism On Onboarding Lionel Messi: No End For BYJU’S Troubles

Delay In Filing Financials, Criticism On Onboarding Lionel Messi: No End For BYJU’S Troubles

The delay of over a year by edtech giant BYJU’S in filing its financial statements for the financial year 2020-21 invited flak from a lot of stakeholders. However, it faced even more criticism for signing football star Lionel Messi as the brand ambassador for its social impact arm ‘Education For All’.

The issue was with the timing of the announcement. BYJU’S announced signing a deal with Messi shortly after it revealed its plans to lay off up to 2,500 employees (or 5% of its workforce). The job cuts were announced after the startup released its financial results for FY21, which saw its net loss surge 20X to INR 4,559 Cr.

“It is foolish for people to think that we will pay money for Messi after letting people go,” founder Byju Raveendran said. The founders of the edtech giant claimed that the deal was not a sponsorship, but a social impact arrangement. However, it failed to convince the critics. 

Soon, the edtech startup found itself in another controversy, with the National Commission for Protection of Child Rights (NCPCR) starting an investigation against it over complaints that the startup was buying phone numbers of children and their parents. The complaints alleged that BYJU’S was rigorously following up with the parents and threatening and coercing them into buying courses, an allegation that the company vehemently denied.

OYO & The IPO That Hit The Backburner 

OYO & The IPO That Hit The Backburner 

Hospitality startup OYO has often found itself involved in one or another controversy since its launch in 2013, and the year 2022 was no different. Its IPO plans and the pushback it has been facing from the industry were the most talked about events for the startup in 2022.

Besides, the Competition Commission of India (CCI) also cracked the whip and slapped a fine of INR 169 Cr on OYO for unfair business practices.

In 2019, the Federation of Hotel and Restaurant Associations of India (FHRAI) filed a petition with the CCI requesting an investigation into the alleged anti-competitive practices of online hospitality players. A thorough investigation by the CCI found that the consolidated entity of MakeMyTrip (MMT) and Goibibo offered deep discounts. The watchdog further said that MakeMyTrip accorded preferential treatment to OYO by denying market access to other players. 

Together, the trio were fined INR 392 Cr, following which the FHRAI again sought a stay on OYO’s IPO

Incidentally, market conditions have already put the company’s plan to list on the exchanges on the back burner. Besides, the decision of SoftBank, one of OYO’s largest investors, to mark down its stake in the startup resulted in its valuation plunging to $6.5 Bn in the private market and the company also laid off 600+ employees.  

Zomato’s Blinkit Acquisition & Questions Over Corporate Governance 

Zomato’s Blinkit Acquisition & Questions Over Corporate Governance 

The decision of Zomato to acquire loss-making quick-commerce startup Blinkit raised questions about the foodtech giant’s plans to achieve profitability. Besides, it also resulted in questions being raised about corporate governance at the Gurgaon-based company. 

Several investors wrote to SEBI about the delay by Zomato in making disclosures relating to the acquisition. Besides, questions were also raised on the lack of disclosures by Zomato about the relationship between one of its cofounders Akriti Chopra and Blinkit cofounder Albinder Dhindsa.

Chopra is married to Dhindsa, and many argued that there was a conflict of interest in the deal. Addressing the criticism, Zomato founder and CEO Deepinder Goyal said that there was nothing to hide about Chopra and Dhindsa’s marriage. Chopra was not involved in any discussions relating to the Blinkit acquisition and Zomato also sought a response from a law firm to make sure that the acquisition was not a related party transaction under applicable law, the CEO said.

The startup’s shares were also under pressure on the bourses throughout 2022 due to concerns about profitability and global macroeconomic pressures. However, the foodtech startup has said that it would achieve profitability between Q4 FY23 and Q2 FY24.

Recently, Zomato was also in the news for its decision to fire 4% of its workforce.

A Tug Of War Between Bhavish Aggarwal’s Ola & ‘Petrol Media’

Razorpay Suspends Payments Link For AltNews After Controversy

Even as Ola Electric prepared to increase its market share in the two-wheeler market in India, the startup was in the news in 2022 for its founder Bhavish Aggarwal’s aggressive responses to any criticism on Twitter. Aggarwal termed many media reports with which he didn’t agree as supportive of petrol-run vehicles and called them ‘petrol media’.

The inability of Aggarwal to take constructive criticism has been by far the most controversial topic this year despite numerous concerns around the safety of Ola Electric’s vehicles.

In March and April 2022, many EV scooters, including those manufactured by Ola Electric, caught fire in different parts of India. The company acknowledged an incident involving one of its scooters in Pune and stated that it would take appropriate action to determine the cause of the fire. 

Besides, Ola Electric also faced a lot of criticism from customers for delays in the delivery of their vehicles and also about the functioning of its EVs.

Could Razorpay Have Handled The Alt News Case Differently?

Could Razorpay Have Handled The Alt News Case Differently?

The Razorpay-Alt News controversy in July became the centrepiece of all data protection-related conversations in the country.

For context, here’s what happened. When an objectionable tweet by fact-checking portal Alt News’s founder Muhammad Zubair landed him in jail, the public prosecutor argued that the website received donations from foreign bank accounts routed through the Razorpay link on its website.

Following the controversy, Razorpay suspended the payments link (it is now reactivated). Meanwhile, Alt News said that Razorpay shared the data of its donors with the police ‘without adequate consent’. 

In the absence of a data protection law in the country, Razorpay’s move to share the data with the authorities came under intense criticism on social media. The critics argued that the fintech startup could have requested the authorities to narrow the scope of the details sought (such as sharing data of only foreign donors) rather than giving away data of all the donors.

The Disarray In Sequoia & Its Portfolio Startups

While multiple startups were involved in controversies throughout 2022, the common link between most of them was Sequoia India. Even as the venture capital firm was trying to shore up its reputation and dominant position during the year, it was rocked by governance issues, financial scandals, legal battles and resignations, among others, at its portfolio startups.

Of these, the top controversies that concerned the venture capitalist in 2022 were those at startups BharatPe, Zilingo and Trell. Following this, the investor also faced a defamation lawsuit by former general counsel Sandeep Kapoor’s firm Algo Legal. However, the suit was later withdrawn. Besides, the closing of Sequoia Capital’s $2.8 Bn fund was also delayed. 

The first major sign of governance problems at Sequoia-funded startups emerged in January 2022 when BharatPe launched a probe that eventually led to the firing of several employees and findings of vendor malpractice. Three months later, Singapore-based Zilingo suspended its 30-year-old CEO and cofounder Ankiti Bose, a former Sequoia analyst, over suspected financial irregularities. 

When the governance issues increased, the VC firm wrote to its portfolio companies to cut ties with Algo Legal, which resulted in a lawsuit by the latter. Kapoor then said that the baseless references to ‘concerning details’ about Algo Legal by Sequoia (and media houses) were harming its interests. 

The Little Ones That Made a Big Impact: Other Startup Controversies Of 2022

From the never-ending legal battle between Amazon and Reliance Retail over the acquisition of Future Retail to Uber Files, a collection of internal emails and documents that shed light on the ride-hailing company’s practices in India and abroad, a host of issues created ripples in the tech startup world in 2022.

The public spat between the founders of crypto exchanges Binance and WazirX over the former’s acquisition of the latter, and the shutdown of Vauld and FTX, among others, raised concerns about cryptocurrencies. It also gave rise to demands for stringent regulations for cryptocurrencies in the country. 

The decision of payments major PayU to terminate its $4.7 Bn acquisition deal of Indian payment gateway company BillDesk, which would have been the largest such deal in India’s fintech sector, also came as a shock to many.

Will 2023 Be Different?

The ongoing funding winter is expected to last for at least two more quarters, which means investors will be selective in backing startups and the focus will be on profitability. This has the potential to further strain relations between founders and investors and give rise to new controversies.

Besides, as a consequence of the financial irregularities and other such issues which cropped up at Indian startups in 2022, the year 2023 is also likely to see an increased focus on corporate governance. However, as investors focus on corporate governance, the startup ecosystem may see many skeletons tumbling out of the closet. As such, it won’t be a surprise if disagreements and spats take place at startups.

While some of the controversies may be avoidable, some are beyond anyone’s control. As such, startups would need to build resilience and be ready to face the challenges that any unwanted and uncontrollable controversies throw at them in 2023.

[Edited By Vinaykumar Rai]

Download Annual Funding Report 2022
You have reached your limit of free stories
Become An Inc42 Plus Member

Become a Startup Insider in 2024 with Inc42 Plus. Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in India’s startup & business economy.

Unlock 60% OFF
Cancel Anytime
Unlock 50% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

From BharatPe To BYJU’S: Startups At The Centre Of Controversies In 2022-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

From BharatPe To BYJU’S: Startups At The Centre Of Controversies In 2022-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

From BharatPe To BYJU’S: Startups At The Centre Of Controversies In 2022-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

From BharatPe To BYJU’S: Startups At The Centre Of Controversies In 2022-Inc42 Media
From BharatPe To BYJU’S: Startups At The Centre Of Controversies In 2022-Inc42 Media
You’re in Good company