The great squeeze: small companies in India

This morning I figured that Rahul Yadav of Housing.com is trending again. This time not for another round of nasty and outright cocky comments but for donating his equity in Housing (worth INR 200 Crores) to the company’s employees. It still is money on paper if seen by the way of traditional business sense in India – that money realized is only when it shows up on your books. Housing.com still is a valuations game with no revenue stream. In our company, the conversation was not so much about Housing.com as much as it was about Yadav’s outburst against Sequoia and other big VC firms in general. My partner and I felt that it was a genuine frustration with these VCs who are no less than glorified gamblers betting on horses. The kinds for whom nothing has mattered ever, besides money and numbers projecting growth of the company. The animosity is genuine, we think.

In our company, we have had a couple of extremely disgusting experiences of getting exploited by some very big companies in India which has caused us to re-calibrate our perception of the value and existence of ethics among Indian companies. While VCs are one camp which has a fair number of reported unfair practices in India, the other is the large Indian companies who contract out work to smaller companies and often hand out an outright raw deal to them. And that is why Yadav’s outburst seems well found to us.

Our company Weaver Technologies LLP is into business of providing technology solutions and data analytics to businesses and non-profits in lifesciences, healthcare, environment and legal sectors. We offer turnkey lab setups, instrument as well as data analysis across these sectors. A recent instance is of a big Indian company which asked for our firm’s consultancy services to set up a water quality testing lab for them. The General Manager of the company was handling this work directly. As the usual practice in the sector goes, lab designs and detailing is a charge service. Smaller companies can’t afford to not charge for this service. From site visits to sending final designs it was over a month long process or slightly more. Our mistake – a) we didn’t insist on a written agreement/ToR; and b) we were tempted by a substantial lab commissioning contract.

As soon as the designs were sent in which also included a list of instruments to be procured for the lab, the company’s senior executive ceases all communication! We have not heard it till this day from him. The water quality testing lab however, was a sure thing to be commissioned. This experience left us feeling vulnerable and frustrated. The trust we had in this big company’s name stands shaken. Our experience suggests that Indian business environment is one of least amount of ethics or respect or dignity of labour. And it especially is true of the behaviour of large Indian companies. Incidentally, another group company of the same group had earlier refused to pay one of our partner the consultancy fee for his services in spite of agreeing to pay for it in the beginning. Our mistake – the same! No ToR signed. We went by faith. 

The great squeeze I am talking about here is – the tough operative business environment in India where working capital loans are hard to come by (for smaller companies) and very little supporting policy landscape in businesses like ours where the entire instruments market is serviced by non-Indian companies. This reliance on instruments (like gel documentation systems, thermocyclers, spectrophotometers of all types, laboratory infrastructure, testing instruments etc) from foreign companies is at an absurd and ridiculous level in India today. The fact that there are no homegrown companies manufacturing these instruments is not because Indian companies do not have the know-how or tech expertise, it is mainly because doing products in India is not easy. Manufacturing is a capital intensive business as well as it requires policy support so that Indian manufactures can be promoted and preferred at least for procurement by Indian establishments. Such a large market demand as of India is totally serviced by foreign companies. Plus, the taste for all things “foreign” among Indians. That’s another killer. This is not to overlook the quality standards and precision that instruments made by companies in Europe or North America have. They are very well made. But, given a chance Indian companies too can match it! Given a chance ! One would argue that why ask for a chance and why not prove yourself… but lets face it. The modern world, of the time in which our company exists and plies its business is not so straighforward and simple. Trade is complex and so are many business areas. International trade more so is not about fairness by any measure. There are commissions to be made, kickbacks to be had and alliances to be favoured. That is what makes a large Indian laboratory procure products of one company over its competitor’s. It is not always about quality or performance.

While small companies reel under this largely unsupportive business environment and get stone walled often, the other wall closing in is that of the bigger companies fleecing smaller ones off, cheating them or shortchanging them. This looks like a rant, but if there were to be a show of hands, I think in Bangalore alone we could fill a 250 seater auditorium with aggrieved small companies. This is the squeeze we feel ourselves into, this year in particular.

This is not to cry about it. We have stuck out and had a good run for over six years now and we sure will continue to grown. That markets are tough, only the fittest survive and that companies must prove themselves in this space … is known and acknowledged. All this is acceptable if its a fair fight. Not when the rules are applied differently for players. And moreover, when rules are dispensed with by the powerful! That’s unfair. The point of this post is to highlight this adverse business environment and the squeeze felt by smaller companies in an unfair, needless manner. Rahul Yadav’s burst is a good thing in that sense, even thought some see it as a career suicide by a promising young entrepreneur. Rough and straight is necessary sometimes!

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