Indian startups under high pressure, causing some to fail: Zoho’s Sridhar Vembu
- ByStartupStory | July 24, 2023
In a recent interview, Sridhar Vembu, the CEO of SaaS major Zoho, expressed concern over the increasing pressure faced by Indian startups in the current venture capital ecosystem. Vembu highlighted that this pressure, along with unreasonable target-setting and excessive focus on profits, has led some startups to eventual failure.
In the past year, several well-funded startups, including Mojocare, BharatPe, Zilingo, Trell, and GoMechanic, encountered financial misreporting and governance lapses. Sridhar Vembu believes that startups today face immense pressure, not only from venture capitalists but also from the entire ecosystem, to meet seemingly impossible standards, such as measuring growth on a weekly basis.
“This is the same phenomenon why students commit suicide in places like Kota. The same exact thing happens. You put in large amounts of money and expect instant results and there are also expectations of unreasonable growth,” Vembu added.
The Indian startup ecosystem has witnessed an increase in governance lapses over the past year. Some well-known startups faced challenges related to financial reporting and internal controls. Agri-tech startup DeHaat’s former auditor raised questions about its inventory management practices for three consecutive years, highlighting concerns about poor internal controls.
Recently, Healthtech startup Mojocare decided to shut down after its co-founders admitted to inflating revenues. Edtech giant Byju’s has also been grappling with governance and workforce-related issues.
Despite the challenging environment, Zoho has been navigating its path to success steadily. In FY22, the company achieved an annual recurring revenue of $1 billion, and its net profit increased by 43% YoY, reaching Rs 2,700 crore. Vembu emphasized that Zoho’s success was not driven by stringent targets but by steady growth and a focus on the company’s vision.
“We took our time to reach $1 billion; I have not put any stringent targets. We will grow at the same pace. I’m not putting any pressure on the leadership team with specific targets,” Vembu stated.
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