ESV Times | Monthly Newsletter | April 2025
Beyond Vanity Metrics: What the 11x and BluSmart Controversies Remind Us About the Kind of Ecosystem We’re Building
In the world of venture-backed startups, bold claims and aggressive storytelling are almost part of the culture. But there’s a fine line between visionary ambition and misleading narratives—and recent events on both global and local stages have reminded us of just how damaging that line-crossing can be.
Take 11x, a high-profile Silicon Valley AI-powered sales automation startup backed by a16z and Benchmark. Last month it was discovered that 11x founders had faked their way to a $350M valuation by claiming $10M ARR (when they only had ~$2M). Here was their creative “ARR hack”. 11x forced prospects wishing to conduct pilot programs to sign a one-year contract, instead of any sort of trial or pilot. Instead, 11x offered customers a break clause (~at 3 months), which made it easy for customers to break the contract. This worked essentially as a trial period. But when reporting annual recurring revenue (ARR), the company didn’t differentiate between trial periods and long-term customers, hence claiming significantly higher booked revenues. Moreover, it falsely listed marquee customers like Airtable, Deel and Zoominfo — the latter even threatened to sue them (TechCrunch article).
Closer home, last week social media has been flooded by news about India’s electric mobility poster child BluSmart’s own downfall – triggered by SEBI’s report on its ‘affiliate’ listed company Gensol. Once celebrated as a cleaner, smarter alternative to Ola & Uber, BluSmart is now in the news for siphoning of funds by promoters and significant financial misreporting. Enough has been reported and said about both BluSmart founder Jaggi’s lavish spend and Gensol’s misrepresentations. But here are two simple thoughts that have remained unanswered since the initial angel rounds (we had a chance to invest, and had passed):
- Why would one invest in a company where the founders are also running a second company
- No investor group / fund seemed to be taking ownership / front-row seat for monitoring & governance, as these were considered to be ‘very seasoned founders
These two cases—though vastly different in geography and domain—yet again highlight the importance of conducting detailed due diligence at the time of investing, and ensuring the financial governance of the company through a regular framework and cadence.
Last but not least, I’m constantly amazed at many investors enamored by the founder’s profile and being unable to hold them accountable for their decisions and financial practices. Similarly, many stellar founders find it almost offensive to ‘report’ to investors and consider their questions / clarifications as intrusive or offending.
At Ecosystem Ventures, we believe that the role of a fund manager isn’t just to identify potential—it’s to guide, challenge, and hold accountable. Our job doesn’t stop once the term sheet is signed.
A responsible fund manager must:
- Set up reporting frameworks that go beyond vanity metrics
- Stay engaged through frequent check-ins, not just quarterly board meetings
- Validate traction with customers and market feedback—not just rely on submitted decks and MIS
- Promote a culture of ethical storytelling from day one
- Encourage founders to share challenges as openly as they share wins
We believe in walking alongside our portfolio founders—not just cheering them on when things are good, but also being there to help them course-correct when the pressure to perform becomes overwhelming.
To the founders reading this: You don’t need to fake momentum to build a meaningful company. The best investors will value your clarity more than your charisma. And like we were taught in our early days of consulting: always share bad news first. 🙂
Let’s collectively build a startup ecosystem where transparency is the currency, not just traction slides. One where ambition and accountability coexist. One where fund managers are more than capital—they’re co-architects of integrity.
Regards
Abhishek Sanghvi
Ecotone
When Nikhil Kaushik, Partner at Ecosystem Ventures, and Abhishek Sanghvi, Founder of Ecosystem Ventures, come together, they break down the high-risk world of startup investing—what it means, why it matters, and how to navigate it with confidence.
🌟 Key Highlights:
1️⃣ Why early-stage investing is risky—but still worth it.
2️⃣ How investors should evaluate risk vs. reward.
3️⃣ Ecosystem Ventures’ approach to backing startups with more than just capital.
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