India’s tech startups and new-age firms seem to have a compliance problem. The latest Google Play Store episode reveals that some startup promoters believe regulations can be bent and rules broken. They also feel privileged enough to be exempt from regulations laid down not just by the authorities, but also by private partners, whose services and platforms they use to do business. Earlier, Paytm was hauled up by the banking regulator for persistent non-compliance of multiple norms.
Similarly, Byju’s was reprimanded by the Ministry of Corporate Affairs for the unexplained delay in reporting its financials. Such blatant violations of the minimum standards of governance always put the startup founders in regulatory crosshairs. It seems no lessons have been learnt from these episodes.
The latest face-off between Google and some app developers over non-payment of service fees further exposed the sense of privilege among some startup founders. Google temporarily removed 10 app developers from its Play Store for not complying with its updated payment policy (11-26 percent commission on in-app payments). Piqued by the decision, the promoters of some apps took to social media and unloaded their anguish over the tech giant’s ‘evil’ business model. They also wanted the government to chastise the US firm for enforcing its own billing system. Google’s action came after some startups moved the Supreme Court challenging Google Play Store’s ‘exploitative’ billing policy; the apex court granted no relief.
Google says it has the right to seek a fee from apps using its Play Store services. Play Store hosts over 2 lakh apps in India and it provides certain features and services to app developers. While most developers are already following the Google policy on payments, a handful of them had an extended relief since they successfully litigated the matter in court. But after the SC refused to interfere in Google’s billing system, the disgruntled startups were left with no option but to comply. Those who did not clear the dues were removed from the Play Store.
Many startups in India have failed to grow their business after the initial success because they lacked a sustainable revenue model. With scarce angel/VC funds available to burn and profitability hard to come by, the founders of these new firms expect the government to keep them floating. In desperation, many of them even play the nationalism card to win support. But this is not how business is to be done. Startup founders need to innovate and pivot, and develop a sustainable business model, instead of looking for ways to mask their inefficiencies.