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The new world driven by technological changes is seeing a proliferation of startups who are questioning the status quo and disrupting industries. The sectors that are being disrupted are many. 3D printing is disrupting manufacturing, transportation is seeing cab aggregators shake up the industry and the energy sector is seeing a radical shift with renewables and battery solutions. The list of industries that will change or are changing is rapidly increasing. The ones that are facing the brunt of these changes have business models that were created some time back and are faced with significant challenges of scale and people when it comes to being more agile. Newer companies armed with new technologies, a radical new way of looking at things and agile low-cost business structures are threatening their very existence. Most primary focus is on gaining more customers, which in turn drives venture capital funding. In most of these business models, sustainability or social responsibility is an afterthought. This primacy of quantity over quality in the start-up world is creating business models where sustainability and being socially responsible is an afterthought, something to be considered once you start to make a profit.
It is perhaps time to deeply introspect about what all this means in a world where civil society is being weaponised to believe in fake news, where social platforms are having a negative impact on the mental well-being of kids and data on consumers is being collected without consent. In the start-up world where companies are typically asked to ‘move fast, break things” a lot seems to be getting broken. Inequality is at an all-time high, democracy is believed to be under threat and people are many times forced to live without basic necessities.
As opposed to this, a new type of start-up is being discussed these days, called Zebra Start-ups. Sahil Agarwal of IIMAGES, a pan IIM alumni community organised a panel discussion to focus on “We need more Zebra start-ups”. Salil says, “In today’s world where every startup wants to become a unicorn there is room for those that do not wish to break their back and are happy to create sustainable businesses that witness reasonable growth. These are businesses that do not necessarily disrupt the eco system, are usually boot strapped and allow the entrepreneur to create a balance between life and business. The term Zebra Start-ups was coined to connote companies that serve a dual purpose. They are both black and white, for profit and for a cause, also they fix things rather than break them.” Zebra start-ups are designed from the ground up to help rather than exploit, to make a profit and yet solve the problems of society. Pradeep Gupta, Chairman CyberMedia says, “Unicorns are based on extremely disruptive models and the idea is to scale up at any cost. Quite often unicorns may not really be making money. Zebra’s are not social start-ups but socially responsible companies who make money.”
The race to become a unicorn is not just of the founders but also that of the people who fund the startups – the venture capitalists who want accelerated growth and increased market valuation. Accelerated growth requirements lead to an unnecessary focus on adopting questionable business practices. In the long-run, artificially inflated stock prices will correct and impact felt by all – shareholders, employees, creditors etc. Venture capitalists who guide these ventures also put social responsiveness on the back burner. Social responsibility should be a fiduciary duty for the venture capitalists. As much as they are responsible to the shareholders they have a responsibility to the stakeholders. Growth and social responsibility are not binary choices but complement each other. Venture capitalists need to understand this and guide founders to marry the growth and social responsibility.
Dinesh Agarwal, CEO Indiamart, “We bootstrapped for the first 15 years of our journey. In terms of size we have raised only 32 million dollars twice. Today, after 23 years since we started every 20th person in India uses Indiamart.” Sanjay Agarwala, MD Eastern Software Systems says, “We are happy to grow slowly and responsibly and work with partners.”
However, it’s not been easy for most Zebra start-ups who have to constantly fight against perceptions. Take the case of Nasofilters, a company started by a team of engineers from IIT Delhi. They created a respiratory nasal filter that sticks to your nose and prevents entry of harmful air pollutants (PM2.5). Prateek Sharma, CEO Nasofilters says, “The general trend is that people rate our success on the basis of total amounts of funds raised. They don’t take into consideration the number of lives we have saved, the repeat customers who are delighted with our products and the profits we make.” This story is repeated often by other companies who are in the Zebra start-up space. Despite these adverse perceptions by peers, these journeys do have a silver lining. Indiamart despite being slow to raise funds is now being listed on the stock market with a possibly 1 billion-dollar valuation.
M P Jaiswal, Director IIM Sambalpur says that Zebra start-ups promote a culture for inclusiveness. “Cultures, values and business models are often ignored by the start-up culture. The Zebra movement is based on the ground realities that people need to be part of the process of making profits. A culture that promotes wellbeing is perhaps what is needed in the India of the twenty first century.”