The Dalmia family’s betrayal: Ashish Sirohi is the founder of the company called Eduwizards Pvt. Ltd. which provides online tutoring for students about to write various competitive exams. Considering the booming internet business in India, Ashish had thought that he could tap into the business’s enormous potential and succeed immensely with a little investment from big shot families like Dalmia Bharat family. Boy was he wrong! The Dalmia family had promised to invest Rs. 20 crore in his business for their mutual benefit. Instead of investing the entire amount at once, they had invested small amounts of that sum every month and on many occasions had refused to invest even that small amount. Early in July, 2016, when they saw that the investments they had made so far was not paying off, they completely withdrew from the investment agreement! Ashish later on realized that this monthly investment strategy was to enable them to get out of the investment deal whenever they desired. The Dalmia family had invested less than Rs. 10 crore when they pulled out of the deal.
The reason: “Chance of very high returns has propelled India’s business families into internet investing but some, like Dalmia Bharat family, want to have returns without the high spend and the high risk”, said Ashish. “They have repeatedly refused to spend and then pulled out completely when they could not flip their investment into a Venture Capital firm because of current funding crunch conditions”, Ashish added.
The trend in India: Dishonest investors like Dalmia Bharat, count that entrepreneurs who consider exposing them, will actually choose to move on and avoid creating controversy and trouble for themselves. This is in fact the sage advice given by experts on the internet to entrepreneurs who raise investor disputes! “This decision to publicly expose the Dalmias is mine alone and against the advice of everyone else, including fellow colleagues whom I had talked with. Everyone warned of the power of such families and urged that I should just quietly get new funding”, he said. Ashish believes, the reason Indian businesses and industries are corrupt and technologically – backward are these traditionally powerful families. They have been having a nexus with the Indian government for decades which enables them to control the Indian businesses and industries. “Everyone in India is terrified of challenging these big family names, no matter what wrong they do. Now these families want to bring their traditional manipulative century-old family methodologies to India’s internet world so that it resembles their family’s business styles”, he said. “On the other hand, I do not want to club all Indian business families as bad for India. We all do admire many such as the Tatas whose ethics and integrity are exemplary”, Ashish added.
Repercussions for his company: “The Dalmia Bharat family’s pullout is not a judgment on our company but only reflects the dishonest character and utter lack of integrity of this family”, Ashish said. Ashish is optimistic of finding investors who will provide at least about a year of financial security by October 15th, with money actually in the company’s bank. He said his customer care executives will be paid on time since their salaries are low and anyone who joined their company last year too will be paid on time. All their tutors working in their marketplaces will be paid on time as funds that are collected from their students are theirs to withdraw every month. “I have gotten authority and agreement from the Dalmias to sell 33% of shares at whatever price I choose so as to get us funds to run. This is an excellent deal for an investor and I have full authority to execute it without consulting again with other shareholders”, he said. [Read about Startup Scams].
Our take: If the government of India wants to seriously improve the volume and the quality of the industries and businesses in India, it has to crack the whip on traditional family businesses like the Dalmias. Businesses in India should become transparent and any malpractice like the one the Dalmia family did should be severely punishable under law. No family businesses should be allowed to have a nexus with the government and thereby power to manipulate and control businesses and industries in India. Ashish as contacted us, and the facts are based on the blog he sent us. Read more Startup News.
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