[am1m]

Originally Posted by Samurai

These irresponsible funded loss making companies poison the well for everyone because they don't care to do the basic arithmetic.

I am in no way defending these practices and in fact thanks to the posts warning about these sorts of companies, have become more wary about job offers from companies that exist solely on funding. So am grateful for those posts.

But how is this sort of practice different from say what a Reliance Jio does? Undercut the competition because they can afford to. And while I agree these are bad business practices, and employees should beware, are they illegal? Is the solution some sort of government regulation/cap in salary that a private VC-funded company can pay? Or just accept that this cycle will continue and a lot of startups will pay the price.

And quite frankly, how do you tell? Aside from obvious frauds, it's difficult to tell if a startup is just burning cash without a business plan, or if it's really a great product that just requires some more time and funding to realize its market potential. I've worked for one such company. I moved on because after x years the company direction kept changing, sometimes 2-3 times a year, and they are still running on funding and call themselves a startup. But what I can for sure say is that everyone in that place believes in what they are doing. There is no attempt to defraud investors there. The product still might take off and become a runaway success (in which case I'll be kicking myself!), or equally likely, they might run out of investors in a couple of years and fold (in which case I'll congratulate myself on my foresight!).

[Samurai]

Originally Posted by am1m

But how is this sort of practice different from say what a Reliance Jio does? Undercut the competition because they can afford to. And while I agree these are bad business practices, and employees should beware, are they illegal?

Well, it is not illegal to throw away money. But do note that countries usually have antidumping duty when these things happen across internationally.

Originally Posted by am1m

And quite frankly, how do you tell? Aside from obvious frauds, it's difficult to tell if a startup is just burning cash without a business plan, or if it's really a great product that just requires some more time and funding to realize its market potential.

I don't really have a solution in mind. But it is important to understand this reality, instead of suffering the delusion of imaginary value creation and inflated self worth.

[OffRoadFun]

Originally Posted by Samurai

Oh, is that what it is? That means if a startup is making losses every year, employees would work for free? Most Indians startups are making losses every year, yet they are the top paymasters, forcing rest of the industry to pay unrealistic wages.


I run a bootstrapped software company myself, and we do make modest profits. However, if we are forced to increase the wages wildly because of the irresponsible wage practices by funded loss making companies with no financial discipline, we too will start making losses. These irresponsible funded loss making companies poison the well for everyone because they don't care to do the basic arithmetic. This is what happened in the last couple years.

First of all, congratulations on running a profitable company, no mean feat!
Also, my original post in this discussion was about justifying "outrageous" salaries of some tech workers which I still do.

Having said that, in light of what is mentioned, I myself believe some of these companies have no sight to profitability for years to come, probably never.

The reason in my opinion is capital is cheap, Fed and central bankers have been flooding the market with money and many companies, individuals don't know what to do with it.

The result is VCs throwing money at anything in hope of next Google/Meta and then throwing more good money at bad money. I don't even need to list the companies with outrageous valuations coz that will be redundant. Doordash, a company like Swiggy with no profit, had an IPO with a valuation of more than $100bn, more than market of cap of Intel today which till last year made $16bn in net yearly income. We live in strange times.

Has it skewed the job market? Yes, it has in one sense which even threatens to make any small and even profitable small company go out of business unless the company is able to convince some VCs that it can scale up big (unprofitably is OK!) and get a lot of capital injected to pay "market" wages and stay in business.

However, I will still say, and may be it will not be liked by all. It is still capitalism which has no pretensions to be perfect or fair. Profits have to be made using labor and machinery as inputs, the big fish are pumping up labor prices using VC funds at disposal forcing many out of business or unable to hire good resources which are critical to success. Some employees are earning in the process unimaginable wages, fed keeps on printing money and the circus continues. Ideally, in a purely capitalistic world, the capital will fail to see returns commensurate with the cost and system will self correct. We seem to be far from that day yet.

Capitalism is not perfect but present scenario is not very different from when industrialists used their capital to stifle competition in the past (RIL). Yet, in world of technology, for all its faults, the chances of entrepreneurs to make it big in India have never been better. And for some of the employees too, as a byproduct. All the best!

[EV NXT]

Originally Posted by Samurai

Oh, is that what it is? That means if a startup is making losses every year, employees would work for free?

That’s why there is the term “partner in profits” .

The right answer to “Whats wrong in sharing profits with the employees” along with that accompanying reasoning would be “Its better to give the money to charity.”

[shankar.balan]

Originally Posted by OffRoadFun

Yet, in world of technology, for all its faults, the chances of entrepreneurs to make it big in India have never been better. And for some of the employees too, as a byproduct. All the best!

The money earned by way of salary by an IT worker and the cash out of his or her ESOPs at the time of a buy out or IPO is amongst the most honest earnings in the world, ever. Amongst the most honest ever, because it is fully tax paid and no chance of any nonsense and dishonest reporting because of the paper trail.
Like the farmer earns the fruits of honest physical toil, the IT worker earns the fruits of intellectual ability plus delivery based physical toil.

It is sad that owing to the greed and indiscipline of a few individuals and companies and the ruthlessness and manipulation of some questionable VCs and PE’s, the whole industry is just reeling with body blow after body blow.

Hope this phase passes soon and the sun peeps out to shine again.

[no_fear]

Originally Posted by OffRoadFun

capital is cheap, Fed and central bankers have been flooding the market with money and many companies, individuals don't know what to do with it.

Was looking for this. This is precisely the core issue why the current startup scene in India is so skewed.

For the past 15 years, the world has been addicted to a zero interest rate environment. Investors have been chasing yield. VC firms realized as long as they can borrow money at zero rates and throw it at anything which has the potential to be the next Google or Facebook, they can make a hefty return on their investment.

There are 2 critical factors for any business to grow and operate

- Cost of funding
- Return on investment

As long as cost of funding is low, you can keep throwing money at any business with the hopes of succeeding. But now with Fed rates hitting 5% and another banking crisis erupting, the free money party will stop.

[Vishal.R]

Originally Posted by Samurai

These irresponsible funded loss making companies poison the well for everyone because they don't care to do the basic arithmetic. This is what happened in the last couple years.

Agree about overall irrationality in everything these startups do but, In India are startups really employ that number of people which can influence market?

What would be approx. number of startups with good funding by venture capitalist's are currently operating in India?

Why there are relatively less startups in other cities like Chennai, Pune, Mumbai etc.?

There are different categories of orgaizations in India which employs people with IT related skills.

1.) IT service companies
a. Indian companies (e.g. TCS, Infosys, Wipro etc.)
b. Non Indian companies (e.g. Accenture, Capgemini, Atos, NEC, Fujitsu etc.

2.) IT Product companies. (Microsoft, Google, Oracle, SAP Labs, VMware, Salesforce etc.

3.) Non IT Organizations (Legacy/Boring or Real businesses depends on one's perspective, Businesses and Governments)

4.) Startups

Do We really feel that category 4 is bigger enough to dictate terms for all other categories?

In my opinion, generally Indian media is obsessed about 1.a and 4, but It is primary category 3 (Non IT Orgs) which pays almost everyone else, directly or indirectly.

In earlier days, these companies would generally buy software and hire a service company to support but refrain from hiring people with IT skills and focus more on core skills, but nowadays software applications have become integral part of almost all operations. Not just traditional entities like banks, manufacturing but Can We imagine even Railway, state transports, RTOs (Vahan / Sarathi) without software? and this is where huge demand is generated, as bigger share of their spending is diverted to IT related expanses.

In India "captive" units are also big employers both in terms of numbers and pay grade (e.g. JPMC, City, Barclays, Renault Nissan, Boeing etc. etc), which impacts overall pay levels and demand of skills.

Also companies like Accenture, Capgemini have huge impact on overall industry compared to even companies like Wipro.

[DigitalOne]

Amazon to lay off 9,000 more workers

Amazon.com Inc said on Monday it is laying off 9,000 more employees in the next few weeks, mostly in AWS, advertising and Twitch, CEO Andy Jassy said in a blog post.

In January, Amazon eliminated 18,000 positions, the largest round of layoffs in the company’s history.

Source

[v1p3r]

Originally Posted by am1m

But how is this sort of practice different from say what a Reliance Jio does? Undercut the competition because they can afford to. And while I agree these are bad business practices, and employees should beware, are they illegal? Is the solution some sort of government regulation/cap in salary that a private VC-funded company can pay? Or just accept that this cycle will continue and a lot of startups will pay the price.

The reason that the govt or regulators don't interfere is that no one is losing here, excepted 'sophisticated' or 'accredited' investors. If you decide to pay an obscene wage, the earner benefits, and it spreads. Any government will always encourage spending. When the bubble bursts, investors lose money (in private placements, not public markets) which are largely unregulated. Overpaid employees often just come back to square one. No real harm done.

Originally Posted by shankar.balan

Like the farmer earns the fruits of honest physical toil, the IT worker earns the fruits of intellectual ability plus delivery based physical toil.

I think the thrust of all of this is that the current fruits are disproportionate to the labour, largely because of macroeconomic conditions. They will soon fall in proportion, and one mustn't then be upset.

Originally Posted by no_fear

VC firms realized as long as they can borrow money at zero rates and throw it at anything which has the potential to be the next Google or Facebook, they can make a hefty return on their investment.

Small correction - VCs don't normally borrow. Venture is a form of investment / asset management which will normally be in the <10% allocation for a large portfolio, half that for mega ones like pension plans. With near-zero interest rates, yields on traditional safe bets like bonds also drop, thus making a 40% IRR in venture a very attractive bet. This is what happened over the last decade+. This will happen again when there is some form of monetary overflow. If VCs borrowed, they would be up the creek without a paddle, and honestly no one would shed so much as a tear.

Originally Posted by Vishal.R

Agree about overall irrationality in everything these startups do but, In India are startups really employ that number of people which can influence market?.

The reason is that the 'best and brightest' minds opt for either starting their own companies out of college, followed by working at great startups, followed by working at MAANG. No one exceptional out of college looks forward to a career with WITCH or IT in a legacy org. And the world looks at where the cream goes, as an indicator of the future. Startups and MAANG have the ability to create disproportionate wealth, that other organizations simply cannot.

[download2live]

The news coming in is not boding well. There is another wave of layoffs coming in. I think people who are in core functions (departments which are actually making money) will be on safer side.
Time to double down on certifications and prepare for the next boom in the hiring market. You want to be ready for it. Call me an eternal optimist.

[Turbohead]

Originally Posted by v1p3r

I think the thrust of all of this is that the current fruits are disproportionate to the labour, largely because of macroeconomic conditions. They will soon fall in proportion, and one mustn't then be upset.

I don't think pay will ever be proportionate to labour. If that was the case, masons and manual labourers would've been the richest people around in the past.

The guy who makes money will always be the one on the right side of the demand and supply equation who may not necessarily be involved in a laborious task.

[am1m]

Originally Posted by v1p3r

The reason that the govt or regulators don't interfere is that no one is losing here, excepted 'sophisticated' or 'accredited' investors.

Oh yes, for sure. I too don't think any government should step in to regulate something like this in the private sector. Market forces will ultimately come to play and as we're already seeing, those startups and companies that were not profitable are paying the price.

Originally Posted by Vishal.R

Agree about overall irrationality in everything these startups do but, In India are startups really employ that number of people which can influence market?

Great question. Something I wonder about too. The headlines are made by these going-ons at the top IT brands, first very high salaries and then layoffs, but overall, how much does it really skew the salary market? At all the companies I've worked at, I've seen a much larger proportion of mid-level performers (nothing wrong with that) who do their work well and if anything are slightly underpaid compared to what they could have got by jumping more frequently. Not to mention the whole 'fresher' intake at very low rates. So is all this just much angst about nothing?

[EV NXT]

Originally Posted by am1m

And quite frankly, how do you tell? Aside from obvious frauds, it's difficult to tell if a startup is just burning cash without a business plan, or if it's really a great product that just requires some more time and funding to realize its market potential.

There are two companies whose backgrounds should help provide an answer to that question. One of them started operations a year before Covid struck and the other has been around for 26 years.

The new company started operations with just 5 employees but it had a clear business plan to build a NDC platform for airlines. It has since bagged the IATA NDC level 4 certification, ARM (Airline retailing maturity) index and IFG certifications. It now has 40+ airlines and counting as its customers and services these airlines with less than 100 employees. There are no intentions of increasing employee strength unless absolutely required. More importantly typical VC’s aren’t allowed in the door. That it has huge cash surpluses of its own does help. And yes, it’s just become an unicorn.

The older company was into several areas with the last attempt being the hospitality space until ChatGPT was announced. It now says its focus is to provide AI solutions on the ChatGP platform! It has 3 employees who’ve just finished college. The promoter has a dream of making it big in IT, has sold almost all the family silver to realize his dream and his never-say-die attitude never fails to amaze.

The newer company has a strong business plan and given the way airlines are actually queuing to get on their platform, its certainly going places. The other company looks at the flavor of the season and changes its business plans accordingly.

These may be two extremes but as a prospective employee, if the business plan is not clear enough or keeps changing often, I would say its better to pass.

[m8002?]

Originally Posted by am1m

Great question. Something I wonder about too. The headlines are made by these going-ons at the top IT brands, first very high salaries and then layoffs, but overall, how much does it really skew the salary market? At all the companies I've worked at, I've seen a much larger proportion of mid-level performers (nothing wrong with that) who do their work well and if anything are slightly underpaid compared to what they could have got by jumping more frequently. Not to mention the whole 'fresher' intake at very low rates. So is all this just much angst about nothing?

Things are not so "simple" and "rational" in the real world. There is always the FOMO and "keeping up with jones" that come into play once there is this huge publicity of 50% and 100% hikes that startups provide. This suddenly makes the rest feel that they are underpaid and entitled to the same 100% hike (doesnt matter if they are the same caliber ). Soon, everyone is job hunting, including the guy who switched jobs 3 months back.

So the number of people being offered crazy salaries is less in percentage terms but the impact on the overall job market is much higher.

[aashishnb]

I would want to make a small observation that I've seen personally.

First the assumptions:
Lala company = family owned & run, could be big or small
Non Lala company = typically non family owned
There's some generalization to equate Non Lala with Professionally managed. However, many can say that many Lala companies are also professionally managed, the large ones for eg.

Now the observations, a lot, rather most Lala companies still have 'old world mentality', where the promoter considers the business an extension of their own reputation / ego / family or sorts.

Due to this mentality, they've typically refrained from firing people, even some who are not required. In rare circumstances, people are fired for 'integrity' type reasons instead of 'performance' type reasons. Many would've observed this in a Lala business operation you know during covid. A side effect of this, they're generally overstaffed, salary increases on a whole may be lower. Some other attributes - typically non fancy buildings, non uniformed peons (on rolls) as against crisp uniformed staff (mostly outsourced).

Now, a non Lala company, everyone all the way to the top is a professional, some may own esops, but dont have 'risk capital' (ghar se paise nahi lage hai). Typically, you'll find fancier offices, fancy facikity management services, etc. An employee would get fancy salaries, good titles, etc. but also could be let go if the project one is working on is dropped, for eg.

An example of the diff wkg styles - a peon/driver may go with a request/prayer to the promoter & will get, say a big loan / advance in Lala entity but in the non Lala entity, even the top boss can't do so (except from his own/personal funds).

The most exterme example of Lala type organization is Government Jobs and most extreme example of the other end would be the MAANG / Gig Economy.

So, one gives you (potentially) long term stability as compared to other that gives (potentially) immediate cash/benefits. There are many who are in between, various levels of grey, so to speak.

Each to its own !!! Its more like shared gain&pain (Lala) vs hire&fire (non Lala).