SUMMARY
For the first half of the year or so, most companies were busy getting new strategies in place to keep their business going in Covid times. But as the economy slowly started to reopen, the startup ecosystem was ravaged by some deadly disputes
For some businesses, these tussles were a way to stay in the limelight. For others, they were an added burden to tackle besides the pandemic. In a rare case or two, as seen in the Khatabook-Dukaan spat, good sense prevailed, and things ended amicably. Some others like Zoho and Freshworks are still baying for blood
Of all the controversies in 2020, the one involving WhiteHat Jr is undoubtedly the most-talked-about. The edtech startup, acquired by BYJU’s, not only hit an annual revenue run rate of $150 Mn this year but also got tangled up in lawsuits and heated criticism
Year End Review 2020
When the world shut down, they survived; when cash flow dried, they raised billions; when deals were few, they got acquired. From exciting launches & mammoth funding to biggest shutdowns, a look back at 2020 through startups’ lens.
For the first time in world history, every country, or should we say every person, had one common enemy – the Covid-19 pandemic. We stood united in a back-breaking battle against the novel coronavirus. But it did not last long. As normalcy returned, albeit slowly, the controversies and the brickbats, the protests and the fights raised their ugly heads again. India’s startup ecosystem was no exception, either, and witnessed its fair share of ugly spats throughout the year.
While some companies fought with their competitors on copyright issues, others challenged global giants. For some, it was a trial by social media, and again, for a few, it was nothing but never-ending clashes that continued unresolved.
As we look back at the year 2020 and analyse how the Indian startups performed as they tried to cope with the new normal, the bitter spats, the hate stories and the venom-spewing also found significance in the big scheme of things. So, let us begin without delay, and remember, you have been forewarned.
Code Of Ethics: WhiteHat Jr Vs Many Critics
If there was one startup controversy that kept the social media booming this year, it was WhiteHat Jr’s disputes with its critics. The edtech startup’s never-ending ad spree seemed to follow people around the internet and incurred the wrath of many. Then there were trolls, meme creators and startup lovers who also had a field day.
But, how and when the banters got ugly? How did the edtech startup, which offers online coding lessons to children aged 6-14, land itself in the middle of serious controversies?
Launched in October 2018, the company sprang into focus when it was acquired by BYJU’S in August 2020. It also claimed to have reached an annual revenue run rate of $150 Mn. But soon after, the coding platform had to undergo a trial by social media. Software engineer Pradeep Poonia and angel investor Dr Aniruddha Malpani were particularly vocal against the platform’s claims.
Around 15 complaints were filed with the Advertising Standard Council of India (ASCI) over seven ads, and in October 2020, WhiteHat Jr was asked to pull down five of the seven ads due to a violation of ASCI code.
But WhiteHat Jr’s founder and CEO Karan Bajaj came back with a vengeance and slapped defamation cases against Poonia and Malpani. Should they lose their respective cases, Poonia will have to shell out $2.6 Mn and Dr Malpani will be poorer by $1.9 Mn.
Poonia, who commented on WhiteHat Jr’s advertisements using an imaginary child called ‘Wolf Gupta’ and later shared the screenshots of the company’s communication through WhiteHat Jr’s slack channels, was restrained from downloading or circulating WhiteHat Jr’s curriculums, among other things. The Delhi High Court also passed an interim order against Dr Malpani, refraining him from posting or publishing or sharing any derogatory or deprecatory content against WhiteHat Jr. He was also directed to take down some of his Tweets.
While all parties concerned were adrift in chaos, Tekie, another coding platform for kids, accused WhiteHat Jr of attending its trial class by posing as a schoolkid.
The next hearing in the defamation case against Poonia is slated for Jan 6, 2021. But the controversy continues to rage, and Poonia is also blaming the edtech company for getting his Twitter account suspended on Dec 6.
A Massive Brawl Fizzling Into Small Equity Exchange: Khatabook Vs Dukaan
Sequoia Capital-backed Khatabook, with 20 Mn registered merchants and a valuation of $300 Mn, found itself in the middle of a plagiarism quarrel in the third week of August. The complainant, in this case, was Dukaan, a recently launched app also operating in the SMB space. Both companies enabled digital storefronts for small merchants.
Suumit Shah, the founder of Dukaan (the company is registered as Growthpond Technology Private Limited), filed a legal notice against Khatabook for unethical and illegal cloning of the Dukaan app, which was on Google Play Store since June 2020. From the UI colour palette to layout, there were more than a few similarities between the two apps. Interestingly, Khatabook’s catalogue-maker for shop owners was called Dukaan by Khatabook and was launched on Google Play Store in the second week of August.
Khatabook, however, claimed that the information was factually incorrect and baseless and that the Khatabook team had outsourced the development of its ‘Dukaan’ app to Growthpond who was then acting as a digital marketing consultant for Khatabook.
It also said that post-development and on the premise of testing it, the ‘development’ team (from Growthpond) published the app on the Play Store, using Khatabook’s proprietary data. This was seen as a clear case of intellectual property theft.
In the course of the legal battle, the Karnataka High Court restrained Growthpond from running, operating and managing the ‘Dukaan’ application on any and all online platforms including but not limited to the Google Play store until the next hearing. Soon after that, the app was delisted from Play Store, MyDukaan.io’s website and other platforms.
However, in a surprising turn of events, the spat ended amicably as both companies mutually settled their two-month-long legal dispute. Khatabook acquired nominal equity in Growthpond’s Dukaan as part of the settlement process, and Growthpond was allowed to list its Dukaan app on the Play Store.
All’s well that ends well!
The Clash Of The SaaS Titans: Zoho Vs Freshworks
SaaS giant Zoho has seen many of its former employees starting their own companies over the years. According to the Inc42 Plus analysis, around 41 startups were set up by 59 entrepreneurs who had earlier worked with Zoho.
Although Zoho had had a great relationship with most of them, it got into a legal battle with another SaaS unicorn, Freshworks. The latter was set up by Girish Mathrubootham and Shan Krishnasamy, who had worked for Zoho from 2001 to 2010.
Zoho filed two lawsuits in March and November in a US Court, alleging that Freshworks had built its business upon theft and misuse of Zoho’s confidential business information. Many of Freshworks’ product offerings originated as tools developed for Zoho’s internal use. Moreover, the company had poached Zoho’s employees to access its database, it was alleged. Freshworks, in turn, had denied all charges of misappropriation of information, saying Zoho’s allegations were not supported by facts. Zoho also asked for a minimum $5,000 to be paid in damages through a jury trial.
The Curious Case Of Copyright: IndiaMART Vs JustDial
It was plagiarism all the way in 2020, and copyright issues continued to plague many companies, big and small. JustDial’s plans to foray into ecommerce also came to a halt when B2B ecommerce platform IndiaMART moved the Delhi High Court on Nov 10, alleging that the former’s upcoming online marketplace JD Mart would infringe its intellectual property rights (IPR). The high court gave an interim order, preventing the launch.
Besides, it had reportedly ordered the inquiry commissioners (they are court-appointed personnel) to make copies of the company’s databases, including the JustDial website, its mobile site and the mobile application, and make an inventory.
JustDial, which was set up in 1994 by VSS Mani, termed these accusations “absolutely baseless and frivolous”, adding that the company would pursue legal remedies. It had further accused IndiaMART of data-copying and cybersquatting, among other charges.
According to the company, the development of its JD Mart platform is running on schedule, and it will be launched after seeking legal recourse from the Delhi HC.
Industry Giants At Loggerheads: Amazon Vs Reliance
Why would two business behemoths fight over a retail chain that is on the brink of bankruptcy? The answer is simple: Everybody wants a piece of India’s burgeoning ecommerce market.
For Mukesh Ambani-led Reliance, which had announced the acquisition of (some) businesses of Kishore Biyani’s Future Group for INR 24,713 Cr, it was all about an entry into the group’s network of 1,500 stores across 437 Indian cities and towns (these outlets collectively cover 16 Mn sq. ft of retail space).
But Jeff Bezos-led Amazon did not want to be left behind, either, thus kicking off the clash of the titans.
The ecommerce giant, which owns an indirect stake in Future Group, approached the Singapore International Arbitration Centre (SIAC), saying that it did not approve the proposed deal between Future Group and Reliance Industries. Hence, the deal should not go through. But that was not all. Amazon also served a legal notice to Future Group for breach of contract.
The case seemed to turn in favour of the ecommerce giant when the SIAC put the Reliance-Future Group deal on hold on Oct 26.
The legal tussle got more intense when the Future Group claimed that the SIAC order would not be enforceable under the Indian law and filed two caveat petitions against Amazon in Delhi High Court. In the end, it turned out to be a big win for Future Group-Reliance, and a massive setback for Amazon as the Competition Commission of India (CCI) approved the acquisition on Nov 10. The Mukesh Ambani-led Reliance Retail now gets access to Future Group’s retail properties such as Big Bazaar, Easyday, Central and Foodhall.
When An Indian Startup Confronts A Global Giant: Paytm Vs Google
Just when we thought nothing more could go wrong in the Year of the Pandemic, there came a disturbing piece of news in September: Google Play Store had taken down the Paytm app. Worry not! Google restored the app hours after removing it, but it surely was a jolt for the fintech firm which has seen incremental growth since the demonetisation in November 2016.
While Google claimed that Paytm violated the policies related to gambling payments, Paytm said all activities on its platform are lawful.
Paytm came back two days later, still feeling outraged. It called the sudden takedown and the subsequent restoration by the Android app store as ‘arm-twisting’ by the global search major.
The digital payments giant went head-on against Google’s monopoly and launched its Android Mini App Store so that users can directly discover, browse, and pay for digital services without installing each app.
Who Should Be Blamed For Phishing: Paytm Vs Telcos
Paytm’s fight was far from over. The platform, and its parent company, One97 Communications, also took on telecom service providers for their inactions against increasing phishing attacks.
After sharing with government bodies a list of 3,500 phone numbers used for phishing and even filing an FIR against some scammers early this year, the company moved the Delhi HC in May, seeking damages worth INR 100 Cr from Airtel, Vodafone and Reliance Jio and alleging that telcos should be liable for curbing unsolicited commercial communications on their networks.
One97 Communications also highlighted that phishing scammers – both individuals and entities – register themselves with telcos under names similar to Paytm’s. However, Reliance Jio and Vodafone Idea countered Paytm’s phishing fraud lawsuit by saying the company was trying to camouflage its own security lapses in managing customers’ data.
A Long-Standing Fight Drags On: CAIT Vs Amazon And Flipkart
The fight between the Confederation of All India Traders (CAIT) and ecommerce behemoths Amazon India and Walmart-owned Flipkart raged on without respite even through the pandemic. This year, too, CAIT questioned the business practices of Amazon and Flipkart in terms of deep discounting, preferential treatment of some traders and more.
The association also accused them of flouting foreign direct investment (FDI) norms, eating into the businesses of local traders and depriving the government of the goods and services tax (GST).
While preparing to launch its own ecommerce portal called BharatEMarket in January 2021, the traders’ body also wrote to Prime Minister Narendra Modi, Minister of Commerce and Industry, Piyush Goyal, Finance Minister Nirmala Sitharaman and the Enforcement Directorate, demanding action against those ecommerce giants for such practices.
