In a surprising claim that looks like a contradiction of sorts, Flipkart's Sachin Bansal and Ola's Bhavish Aggarwal now want the government to protect them against competition from foreign rivals.
Specifically, the two executives who lead India's top e-commerce player and cab aggregator respectively, want the government to favour homegrown startups against foreign competition the way China did in the past and helped create giants like Alibaba and Tencent, Economic Times reported. Ola and Flipkart have been facing tough competition from Uber and Amazon in the recent months.
"What we need to do is what China did (15 years ago) and tell the world we need your capital, but we don't need your companies," Bansal, executive chairman and cofounder of Flipkart, said on Thursday while addressing the Carnegie India Global Technology Summit.
But as Mihir Dalal writes in the Mint, Flipkart and Ola happen to be two of the three largest foreign venture capital-backed companies in India. In fact, Flipkart's main operating company is registered in Singapore.
Aggarwal and Bansal claim that American companies could threaten high-value jobs in India, and local companies would ensure that security, data and privacy stay in Indian hands. However, it's unclear how the companies would exactly be able to do that given many tech companies increasingly use enterprise technology like public cloud, networks and hardware that are largely manufactured overseas, and far from homegrown.
Bansal also suggested the government should take a cue from Donald Trump's victory and Brexit as evidence of the nationalist sentiment among people and purse more protectionist measures.
"We need to take a more India-centric approach than trying to become an ideal country based on standards set by the rest," Bansal said.
While Ola's Aggarwal suggested that it's unfair that giants like Amazon and Uber have more money available to pump in India while Indian startups are having to struggle to raise capital. Indian startups have faced criticism over their business models that have prioritised customer discounts and overspending putting financial pressure on their balancesheets.
"It's much easier for non-Indian companies to raise capital because they have profitable markets elsewhere," said Aggarwal. "You might call it capital dumping, predatory pricing or anti-WTO but it's a very unfair playing field for Indian startups."
While access to capital may be easier for strategics like Amazon that rely on public markets and other avenues, venture capital investors, typically, do not fund companies endlessly, but seek a return on their investment by either listing their portfolio companies in the public markets, or selling it to another large investor. But these exits can prove difficult if companies aren't profitable or financially viable in the long run.
Separately, any sudden adoption of protectionist schemes is also potentially counterproductive and strange for India given that PM Narendra Modi has been wooing foreign investors and companies to invest in India, the Mint noted.
To be sure, protectionist calls like these aren't new to India and have been tried before, with dangerous outcomes.
Devi Yesodharan writes in Scroll how in the 1940s, business lobbies including the Tatas and Birlas sought policies friendly to Indian business, which led to the notorious Licence Raj and decades of slow growth and grinding poverty in India. Bansal is also said to be in talks with several Indian entrepreneurs and investors to form a similar local lobby group to make laws that favour Indian companies.
"Our economic history offers us a cautionary tale of what happens when we yield to emotional, nationalistic appeals," Yesodharan said.
Ola, which is run by parent ANI Technologies, has previously received funding from Japan's SoftBank Group, Tiger Global Management, Russian billionaire Yuri Milner's DST Global, US venture capital firms Sequoia Capital and Accel Partners, New York firm Falcon Edge Capital, Matrix Partners India, and Hong Kong-based Steadview Capital. Ola last raised funding in November 2015 at a $5 billion valuation.
Flipkart has received funding from Tiger Global Management, Qatar Investment Authority, South African media conglomerate Naspers, Singapore sovereign wealth fund GIC, DST Global, which is run by Russian billionaire Yuri Milner's and US venture capital firm Accel. It last raised funding in mid-2015 with Global Management and Qatar Investment Authority investing $700 million at a $15 billion valuation. It also has a number of mutual fund investors like T Rowe Price, Fidelity and Valic. Flipkart's valuation was recently slashed by Morgan Stanley by 38% to $5.54 billion.