restructuring: Startups shuffle top deck, play to ace long-term profitability game

Over a dozen new economy ventures have appointed a new chief executive over the last 12 months, as a greater focus on profitability and governance gains primacy across the sector.
Early this month, news aggregation startup InShorts cofounder Azhar Iqubal shifted from the role of CEO to chairman as cofounder Deepit Purkayastha donned the chief executive’s hat, while at Mygate, Vijay Arisetty became chairman when cofounder Abhishek Kumar was appointed CEO.

At Third Wave Coffee, founder Sushant Goel transitioned to a board role after former KFC India head Rajat Luthra was roped in as chief executive, effective April 1.

“The journey of starting up and getting the company at a certain scale is very different from taking it to the next level,” said a venture investor with a global firm. “These changes are ultimately healthy in the sense that these startups are reaching a particular level.”

Trend likely to Accelerate

“A professional CEO coming in is something that should be celebrated,” said the venture investor. Top-level changes have also been seen at warehouse automation firm GreyOrange, ecommerce firm Dealshare, logistics startup Porter and dairy products brand Epigamia.

Industry executives point to a variety of reasons driving the cleanup at the top but are united in saying the “trend is likely to only accelerate.” In a survey of Indian startup founders by InnoVen Capital earlier this year, 76% said they see a professional CEO running their company, up from 70% last year.

Ashish Sharma, managing partner of the Temasek-backed InnoVen, said, “Most founders know how to take the company from zero to one. Some founders are able to take it from one to ten…but only a few founders are successful in navigating the ten to hundred journeys, as scaling up requires a different skill set.”

Ecosystem in churnWith funding in the technology and startup world drying up over the last 12-18 months, companies have been under investor pressure to chase profitability, burn less cash and grow sustainably. The top deck reshuffle in several cases has been a result of that, industry insiders said.

“This trend is a clear-cut callout that in the ecosystem, there is heavy stress on the path to profitability and a very serious relook,” said Anshuman Das, cofounder and CEO of staffing firm Longhouse Consulting. In January this year, in what was an investor-led restructuring at the Alpha Wave Global and WestBridge Capital-backed Dealshare, Kamaldeep Singh was elevated to the CEO role.

Cofounders Sourjyendu Medda, Vineet Rao and Sankar Bora quit the company over three months. Several others planning to go public are also bringing in professional executives to lead the charge.

“Studies in the US show only one in four startups going public have the original founder as a CEO,” said the venture investor cited above.

In May last year, Allen Career Institute, which was primarily run by its promoter family led by Brajesh Maheshwari, put Nitin Kukreja at the helm. Kukreja was a nominee of Bodhi Tree, which had acquired a 36% stake in Allen for $600 million. Bodhi Tree is backed by James Murdoch and Uday Shankar.

Less on Plate

A Bengaluru-based investor said another reason why founders are increasingly stepping off the daily treadmill is to focus more on newer initiatives.

Mygate chief Kumar told ET that over the last six to nine months, his predecessor Arisetty had been reducing his day-to-day involvement, with Kumar taking more of an executive role. “Vijay has been looking at more strategic initiatives and mentoring roles… because we wanted to create mental bandwidth for him to look at some new opportunities and initiatives,” Kumar said.

Similarly, Epigamia cofounder and CEO Rahul Jain said that as the company began focusing on profitability, the management – earlier led by cofounder Rohan Mirchandani – felt the need for a more hands-on approach. “From the very beginning, we both have worked on pretty much everything together – from fundraising and stakeholder management to operations. Rohan has been based in New York and after Covid, it became difficult for him to come down to India very often,” he said.

Serial entrepreneur Mukesh Bansal, who is working on several new ventures, stepped down as chief of Cultfit in October last year. Naresh Krishnaswamy, a senior executive at the firm, was elevated to chief executive.

Blume Ventures-backed GreyOrange also saw its cofounder Samay Kohli step down as CEO to be replaced by Akash Gupta, the firm’s other founder. According to people aware of developments, management changes happened as GreyOrange pivoted away from its hardware and robotics focus to becoming a software-as-a-service platform.

InnoVen’s Sharma said, “As the company grows, founders also must evolve as leaders and demonstrate capability to run large complex organisations. Some founders show a learning mindset and continue to develop as leaders, while some struggle. In such situations, great founders are open to bringing in a professional CEO.”