In May 2016, two young entrepreneurs, Deepak Modak and Abhishek Periwal, cofounders of online lending marketplace KountMoney, arrived at the offices of their larger rival Lendingkart in Bengaluru. Over the past year or so, the duo had built a promising venture, but in a market where funding was scarce and competition fierce, KountMoney needed help.
Lendingkart had raised millions in funding (it would announce a $32 million tranche weeks after this meeting), and had ambitious growth plans. This meeting, orchestrated by common investor Ashish Goenka, was meant to provide some wise counsel for KountMoney’s founders. Instead, over the next two months, as it became apparent that their business was running aground, they opted to be acquihired by Lendingkart. “These entrepreneurs can hit the ground running from day zero… this is very valuable for a fast-growing company,” says Harshvardhan Lunia, cofounder, Lendingkart.
If the first exploratory meeting was held over cups of coffee at Lendingkart’s rooftop cafeteria, it took a couple of months and multiple interactions to seal the deal. In the end, Modak and Periwal made the shift, betting that their entrepreneurial energy and ambition would be better served at another flourishing venture, rather than risk running out of runway at their own startup.
Joining hands
Twenty kilometres to the north, Sujayath Ali, cofounder of Sequoia Capital-backed Voonik, an online apparel venture, is using a patchwork of acquihires to grow his business. In the past year or so, Voonik has added a diverse set of technology and talent to its portfolio, by bringing aboard the founding team of fledgling (sceptics would call it floundering) startups TrialKart, Dekkoh and Zohraa, giving the company access to new technology and domain expertise.
While TrialKart gives Voonik — which is in a door-die battle with the likes of Myntra and Limeroad — access to image recognition technology, Zohraa offers experts in ethnic silk apparel. Ali has kept his eyes peeled on distressed startups and swooped in to pick up the pieces.
By his own estimate, there are about 25 former CEOs working in Voonik, and acquihiring has been a successful way to hire the best talent and get access to technology and domain expertise. “Each of our acquihires has been working better than expected for us,” he says. “We like hiring founders of startups, because they are entrepreneurial and energetic and willing to chase seemingly impossible goals.”
For ambitious entrepreneurs, an acquihire is often the last option before a business is wound up. While a founder would ideally like to see his business grow, not everyone can expect it. Inevitably, some startups fail and entrepreneurs try to find themselves a soft landing when the funding fuel runs out — in the form of an acquihire. While large companies are often targets, their less nimble work culture often sees such deals failing. For example, Paytm acquihired online education marketplace Edu-Kart, but its founders left within months. Similarly, the founders of Appiterate and AdIQuity, acquihired by Flipkart, too quit.
While Paytm declined to get into details, a Flipkart spokesperson contended that other larger internet commerce ventures needn’t be bad destinations for such deals. The spokesperson pointed to PhonePe, the UPI-based payment service in the country, which has crossed 10 million downloads. The founders first came to Flipkart via an acquihire, built Flyte, its music business (which shut), stayed on in the company and were given senior roles. They left and worked on a new venture, which was again taken over and they returned to launch PhonePe last year.
Also read : …