When Investor Funds Are Used For Everything But The Startup

Having run two startups, Social Samosa, and Igenero, I feel the pulse of the startup industry. Over the course of 7 years of running Igenero, we have worked with 80+ startups. Not boasting, just setting some context. [Winks]

Igenero currently works with a bunch of venture capital funds & helps their portfolio companies build a better product or service. And during this whole process of working with the startup on frontend or backend or ux/ui, we spend a lot of time with the core team and also the key employees.

While working closely with the entire team, we end up building close relationships with them. Some of our clients have become great friends of ours, and we get a drink often with the employees as well.

The dark side:

I love startups. I love the whole journey of a startup turning into a company, raising funds, hiring people; synonymous to raising a child. But while we all love the kid when he has chubby cheeks and can’t talk, we all end up getting cranky with a howling tantrum throwing 5 year old.
Similarly, I can’t help but detest some of these startups who have got a cushion of the investor’s money and chose to make the worst use of it.

make it rain money startup startups in the air

I’m aware of startups which have a raised a sizeable chunk in their seed or series A round, and are throwing away the investors money. I am often stuck in “That awkward moment when” the employees of our clients ask us to help them. And help with what? Asking the founder to be a little more mature & not to blow up investor’s money! Blowing up money how I ask?

  • They never pay their employees on time.
  • Vendor payments are more or less like a football match! The vendor gives up & settles for a red card, with letting go 30%-50% of the entire pending amount.
  • The founder travels business class, stays at five star hotels, and travels every month on pretext of work.
  • Draws salaries on the names of family members as employees & the list goes on and on…

And now, I’m in a catch 22 situation, where I really don’t know if I should be reaching out to the founders at all? Or should I just let it go?

In the last 12–18 months, I’ve come across this situation with three different startups, and all the three have raised money from marquee investors in India.

This whole charade is not what startups are about. Unfortunately, a bunch of people seem to be going this same way & it worries me.

Have you come across any such disheartening narratives?

P.S. I know it’s none of my concern how a company works or pays its employees or vendors. All that I should be bothered about is, if I’ve got my money out! In some cases I have, in some cases I’ve not, but that’s a story for another day.

[About The Author: Aditya Gupta is the cofounder of iGenero

4 Replies

  1. One more stupid article like this and I will stop reading next big what.

    Where is the point? Just because the writer knows the founder of next big what, this article is up I feel. Do you guys have a quality check team?

  2. I know from friends that in one startup, founders live in houses which are on company lease. Yes so that means entire rent is being paid by investors. Founders have their wives as employees doing some support job. Obviously, working hours are flexible for them.

    Also company credit card is being used for dining out.

    Founder’s relatives who are traders get undue attention in boosting their products in search indexes (big boost means product appears at the top or on first page, which in google parlance means that product gets 50X more views than other products) in ecommerce platform

    • Yeah, just because you know it all your name is XXX. Go, get a name and talk!
      The story always has two sides. Showcasing just one is deliberate oblivion. Check the intent for that too.