A case against startups : Uber and Flipkart are not small businesses

A big myth is created by few that big companies are opposing the newer entrants in the market like Uber, Ola and TaxiForSure. Nothing can be far from truth. Most of these are sometimes started by one or two guys but soon are lapped up by VCs with deep packets who runs the business in the background behind these so called entrepreneurs. Story is then sold to media that so called entrenched players in cahoot with governments are not allowing the new nimble and efficient players to do business. It is as if a small startup of 50 is pitted against the might of big players. The facade of VCs is created to hide the real investors.  Every day, we keep hearing news about newer terms like VCs, angel investors, seed fund and whatnot. Their definition and responsibility keep changing every day. Same set of investors are behind most of these newer era firms with little insight. Look at below numbers.

Does these numbers tells a story of a David fighting against Goliath? Looking into the history of most of these, we can see that investors from USA and Japan and some Europeans are driving these valuations. These valuations does multiple things. First of all, they scare existing businesses into thinking that they are doing something wrong. In general, these lofty valuations are mostly thin air backed up some serious money from shady investors. They also attract talent to join these companies thus depriving existing companies with valuable human resources. Media gets enamored and they too are sometimes bribed in various ways to jack up valuations.

This is the same story that unfolded during industrial revolutions times. Western manufacturing was not able to stand up to eastern efficiency and low cost. Costs are high in west for simple reason that the terrain in those places makes living costlier and population less. In tropical and eastern places, weather allows people to work more as well as have more children. What this led to? The industrial complex started smear campaigns against everything done by easterners including medicine system, education, belief system and business practices. Everything was denounced in coordinated way. This led to destruction of local business and industry and converted everyone into a trader or net importer. Now, that slowly that advantage is going away and manufacturing has moved to east, Internet era businesses have come with their promise of efficient and cheaper options. Reality if far from this.

Only these 3 will give the idea of coercive power used by these new age companies.  They are driving the traditional businesses out of the business through various tricks and their standard refrain is that content is user generated. If the content is user generated and these companies do no tweaking on it through algorithm, this argument may stand valid. However, most of these recommend most popular and sometimes most controversial reviews and listing on top trying to entice customers to pay for those. That’s like the botched mind experiment of FB. They pick up data from various sources including the retargeting, cookies, phone contact lists  and other places to create a profile for an user. These data are clubbed and then executives decided what kind of content will be pushed to a set of users. The user generated content is not left to itself. Raw stuff is cooked to create something else altogether.  Just now, a news came up that Myntra.com is closing its website from May 1st .  Justification is given that mobile is driving 80% if businesses. The real reason is something else. It has to do with accessing contact lists via apps and other content on the mobile which can then be used for various purposes. Its is not easy to do so a website given the strict seclusion for web apps from the user environment. user need to enter all the data. PII cannot be read by websites which is not the case in native apps.

Conclusion of all these is that these new era companies are not small ones. They are propped up by shady investors who are trying to enter markets through the opaque route using the same tricks used during the 18th and 19th century. Big money from west is behind all these. Governments in east must be vigilant and in this aspect, I wholeheartedly welcomes Government initiative to block Uber from all over India.

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