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Nearly 40% of founders leave startups after unicorn acquisitions

About 40% of founders whose startups were acquired by Indian unicorns left their own venture or the combined entity, according to a new report.

Of all Indian unicorns, 80 have acquired or “acqui-hired” more than 415 startups. These startups have a pool of 671 founders, of whom 272 or roughly 40%, left after their venture was acquired, as per a report accessed exclusively by BQ Prime from data intelligence platform TheKredible.

As many as 60% of these 272 quit immediately after the deal was done. For those founders who stayed with the company, the average duration of those who stayed with the company stood at roughly 6.7 months after the acquisition.

Out of the total 671 founders, 236 or 35.2% stayed with their startup as founders, while 108 or 16.1% chose to work with acquirer companies in a senior role, relinquishing their previous role as founders.

Further, 139 or 20.7%, of the founders left their startups and moved on to their next venture. About 14% of founders moved on to seek regular jobs in other companies, and 12 founders either turned into investors or joined a venture capital firm.

E-commerce giant Flipkart and house of brands Mensa Brands topped the list of unicorns, with a total of 21 acquisitions each. Byju’s followed closely with 19 acquisitions to date.

“Unicorns like Zomato and (formerly have 16 startups each in their acquisition portfolio. Edtech firm upGrad, fintech company Paytm, and SaaS firm Freshworks followed suit with 15, 14, and 12 acquisitions, respectively,” the report said.

Founders quit because most of the time, when they join larger organisations, they find it a bit difficult to transition from leading a smaller team to a large, full-blown corporate house, according to Aditya Arora, chief executive officer of Faad Network Pvt., a venture capital firm.

The difference in vision is also a reason, according to Arora. “Founders have a very different vision because they’re looking at things from a microscopic perspective, but when they move into larger organisations, the vision entirely changes,” he said.

Timeline issues are also a probable cause, he said. “Startups work on shorter timelines and shorter budgets. They are able to execute things faster, but in a larger organisation, it takes time and budget to get things rolling. There’s a hierarchy as well, whereas in startups, the structure is flat. That’s why I think founders are a bit misaligned in terms of joining larger organisations.”

Here’s a breakdown of how many founders left post-acquisition for three of India’s largest startups:

Flipkart Pvt. started its acquisition journey in 2011 with Mime360, which was founded by Sameer Nigam, now the chief executive officer and founder of PhonePe Pvt. The Walmart-backed company also went on to buy Myntra, eBay India Pvt. and Cleartrip Travel Services Pvt., among others.

Of 21 companies acquired by Flipkart, 12 founders quit the unicorn. Mech Mocha’s Mohit Rangaraju and Arpita Kapoor quit immediately, while Myntra’s Mukesh Bansal and Ashutosh Lawania resigned 16 and 33 months later, respectively.

Of the 19 startups acquired by Byju’s (Think and Learn Pvt.), eight founders left at some point. Five such founders left immediately after the acquisition, while WhiteHat Jr.’s Karan Bajaj stayed for only about 12 months.

Osmo’s founder, Jerome Scholler, worked with Byju’s for the longest post-acquisition, completing a total of 28 months.

Ten founders of the 16 startups acquired by Zomato Ltd. left the company post-acquisitions.

Runnr’s founders spent the longest duration, with Mohit Kumar spending 49 months, Arpit Dave working for 31 months, and Aravind Reddy working for 29 months at the unicorn before quitting.

The remaining six founders left immediately, including Pankaj Batra of Sparse Labs, Alper Tekin of Mekanist, Guk K of Ciband, Igor Treslin of Lunchtime, and Cristian Rosescu and Karen Gibson of Menu Mania. Bloomberg

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